The IT analyst research firm, Gartner Inc., released its annual Magic Quadrant for E-Discovery Software Thursday. The report analyzes 22 electronic data discovery software vendors. The most notable observation about this year’s Magic Quadrant is how little difference there is from the 2013 report. Does a static Magic Quadrant mean a stagnant EDD market?
Gartner’s Magic Quadrant is a closely watched barometer of the EDD market. The company is one of many research organizations that track EDD trends, including my employer, 451 Research, Forrester Research, International Data Corp., and others. Gartner launched its Magic Quadrant for E-Discovery Software in 2011, and has developed Magic Quadrants for other IT markets.
The report designates the vendors into four categories: "Leaders, Challengers, Visionaries and Niche Players." Although these was some movement within categories, this year's analysis remains essentially the same as last year's—with only one vendor dropping out, two vendors changing categories and no new vendors entering this year's matrix of vendors.
LITTLE CHANGE
The only substantive changes were that Falls Church, Va.-based Driven Inc., dropped out of the Magic Quadrant; while Hopkinton, Mass.-based EMC Corp., the seller of Kazeon software, fell from the Visionaries quadrant to the Niche Players quadrant and Tokyo-based UBIC Inc. traded places with EMC, jumping from Niche Player to Visionary.
The Magic Quadrant's four categories are based on what Gartner calls a vendor’s ability to execute and its completeness of vision.
THE RANKINGS
•Leaders: AccessData Group Inc., Exterro Inc., FTI Consulting Inc.’s FTI Technology division, Guidance Software Inc., Hewlett-Packard Corp.'s HP Autonomy, kCura Corp., Kroll Ontrack Inc., Recommind Inc. and Symantec Corp.
• Challengers: Epiq Systems Inc., KPMG, Nuix Pty Ltd., and Xerox Corp.
• Visionaries: Catalyst Repository Systems, IBM Corp., UBIC Inc., and ZyLAB.
• Niche Players: CommVault Systems Inc., EMC Corp., Integreon, LexisNexis, and Stroz Friedberg.
For inclusion in the Magic Quadrant, vendors must license EDD software, software appliances or software-as-a-service for which they own the intellectual property, have at least $20M in annual revenue, cover at least two functions of the Electronic Discovery Reference Model and meet other requirements.
WHAT IT MEANS
At first glance, a stagnant Magic Quadrant might make one think the EDD market itself was stagnant, but many industry observers don’t see it that way.
“A lack of movement in the Magic Quadrant doesn't necessarily indicate a downturn in the e-discovery market," said Barry Murphy, senior vice president at Seattle-based X1 and a former EDD industry analyst at both Forrester and the eDJ Group. "We've had some significant new technologies in the market in recent years, and the last 18 months may represent a period where corporate customers are sticking with their current technology and evaluating their options before changing to a new technology—and a new vendor."
Murphy predicts there may be greater movement among EDD providers in the near future. "Given the cyclical nature of any industry, including the tech sector, you're always going to have periods where there's not much change among providers, but I think we will see change in coming years," Murphy said, adding that, although the EDD industry is entering another period of new EDD technologies, with the legal market's conservative approach to embracing new technology, change comes more slowly in legal than in other business verticals.
Bobby Balachandran, president and CEO of Beaverton. Ore.-based Exterro (a vendor named a Leader in the Magic Quadrant), agrees a lack of movement in the report doesn’t equal a dormant market. “There has been a considerable consolidation in the e-discovery market, but I expect to see a more movement,” he said.
Although some have predicted the move to corporate information governance will supplant the e-discovery market, Balachandran disagrees. “The demand for e-discovery is growing. Information governance is something that’s in support of e-discovery, not in lieu of e-discovery,” he said.
Some EDD experts have gone a step further, noting the limitations of the Magic Quadrant.
Chris Dale of the U.K.-based eDisclosure Information Project, is skeptical. “I am no great enthusiast for lists, which purport to rank e-discovery software providers, feeling that even Gartner’s sophisticated model does not do justice to the range of factors which contribute—or which ought to contribute—to the decision-making," said said Dale, a former London-based law firm litigation partner, who is now a consultant to many of the companies in the Magic Quadrant.
Rob Robinson, managing partner of the Austin, Tex.-based e-discovery consulting firm, Complex Discovery and a former marketing executive at e-discovery companies that have appeared in the Magic Quadrant report, echoes Dale’s sentiments. “The Magic Quadrant is a valuable, well-researched tool, but it doesn't assess many of the important parts of the e-discovery market," he said. "The e-discovery market is an industry comprised of companies that may develop, integrate or aggregate both software and services. As the Magic Quadrant is limited to software developers, albeit some with services as well, there are many service providers making a real impact in e-discovery that are outside the software scope of the Magic Quadrant."
Robinson adds the Magic Quadrant may also miss the disruptive innovators in the EDD market. "As good as the Magic Quadrant is, it doesn't truly highlight new and emerging information governance platforms that move beyond the textual analytics limitations of many of today’s e-discovery and information governance platforms.”
Dale says there’s at least one important takeaway. “The fact that the rankings have hardly altered this year does at least confirm one thing: the e-discovery world is holding its breath as predictions of impending cataclysm for some—and a leaping ahead for others—seem to have been deferred for another year.”
David Horrigan is analyst and counsel at 451 Research and a former reporter for LTN and The National Law Journal.
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