Electronic discovery is moving to the cloud. This is hardly surprising when one considers the client-focused benefits of cloud computing and the extraordinary market opportunities for vendors.
Let’s look at the numbers. The market for electronic discovery continues to grow with some estimates indicating aggregate software and services revenue growth from over $3 billion in 2010 to in excess of $6 billion by the end of 2013. Within this quickly emerging and expanding market, there is a pronounced increase in the acceptance and availability of cloud based electronic discovery offerings. For the two dozen or so leading vendors in this market, the opportunity is staggering.
In order to put this shift into perspective, I caught up with Bret Laughlin, the Founder and CEO of Orange Legal Technologies. Laughlin began his career in the litigation support market in 1995, when he founded a scanning and coding company. Ten years later, the trend toward electronic discovery was evident to him and other vendors taking the lead.
“It was clear even then that the winners in this space could never be those who cobbled together solutions, as many vendors still do,” Laughlin told me. “You had to have your own intellectual property – a race car that you can refine and tinker with in order to meet the needs of many clients with one platform.”
“You either built the platform from scratch or worked with industry experts to build out an existing platform into a world-class offering,” he added, referring to OrangeLT’s 2007 acquisition of its One0 platform. Having such intellectual property was crucial for an early-moving vendor that transitioned its offerings to the cloud in the form of SaaS.
The cloud model has a three-tiered architecture based on (i) infrastructure-as-a-service (IaaS), (ii) platform as a service (PaaS); and (iii) software-as-a-service (SaaS). Cloud-based services may be used on demand, anywhere in the world (“location independent”) and independent of any specific hardware behind a corporation or law firm’s firewall. Cloud-based e-discovery vendors offer numerous benefits for the corporations and law firms that partner with them. These include:
- The ability to scale or decrease one’s service level at almost no marginal cost beyond that of the on-demand services;
- Not having to purchase upgrades;
- Drastic reductions in on-premise capital expenditures. IDC predicts that cloud computing will reduce the cost of owning IT infrastructure by 54 percent. The importance of such a decrease is highlighted by the statistics presented below.
- Usage-based pricing with no fixed contracts or contracts with renewable terms as short as 30 days.
It’s no coincidence that these benefits share an overriding theme – cost savings. Information Week sponsored a study of 374 business technology professionals. Each was asked to identify the biggest challenges associated with on-premise business applications. Multiple responses were permitted. The results are not surprising, and should counsel corporations and law firms, which are much less likely to have adequate internal infrastructure, to partner with cloud-based e-discovery vendors.
- Cost of IT staff resources that must be supported – 57%
- Cost of upgrading software – 57%
- Cost of maintaining infrastructure – 55%
- The inability to take advantage of functionalities then-available on the newest version – 34%
- The lack of flexibility to support changing business needs – 32%
- Dated user interfaces – 27%
- Limited number of vendors to choose from – 22%
Cloud computing raises myriad legal concerns, as I wrote earlier this year in Corporate Counsel. These concerns are very real, very important, and expanding as case law and technology play their own cat-and-mouse game to define and push (for the most part, respectively) the boundaries of what’s legally defensible in electronic discovery. Counsel may wish to address with prospective electronic discovery vendors many of the concerns I identified in the article above.
Security is also at the top of clients’ concerns, according to Laughlin, especially for stakeholders of valuable intellectual property. He advises potential clients to ask vendors whether they have industry-standard certifications such as SAS 70. Clients should also inquire as to how their data is being stored so as to be able to identify which servers hold their data and whether it can reside on a public or private (i.e. single client-dedicated) cloud.
Cloud computing is the most exciting development in IT and the business world today. As corporation and their law firms produce ever-increasing amounts of electronically stored information, or ESI, e-discovery vendors must move to the cloud in order to realize and pass along to their clients the benefits of that migration. With rewards come risks — concerns related to the cloud are both legitimate and, at times, overstated. But they should not be underestimated. Laughlin advises working closely with an expert third-party vendor with deep experience and the lay of the land.