E-Discovery Search and Storage Providers Await a Litigation Boom Following Financial Crash

Now is a good time to be an e-discoveryware provider.

Companies such as Kazeon, Autonomy, Clearwell Systems, Attenex, Symantec, Seagate Technology's MetaLINCS, Iron Mountain's Stratify, LexisNexis, Recommind and some other smaller companies stand to gain business from what many expect to be a surge in litigation surrounding the Wall Street financial crisis.

These companies, by nature, like to talk about "proactive and reactive" e-discovery. It's good business for potential customers to look ahead and be prudent about being prepared for potential litigation, not to mention good business for the e-discovery providers.

"Proactive e-discovery" means "information management."

Electronic records management software has become a strategic tool for organizations due to increasing national and regional regulations such as the 2006 additions to the Federal Rules of Civil Procedure, the Sarbanes-Oxley Act, and the Data Protection and Freedom of Information acts.

E-discovery itself is the process by which records are gathered and processed for litigation. This includes anything digital: word processing files, photos, e-mail, audio and video files, instant messaging transcripts, Internet bookmarks, and even data center users' logs.

The financial crisis may mean big business for segments of the tech industry. Click here to read the full story.

The e-discovery folks have a point. When lawyers show up in the front lobby, and if their complaint becomes actual litigation, the courts will want to see that an enterprise has corporatewide policies and processes in place to facilitate the discovery of all information—digital and non-digital—relevant to the case. It's now the law.

The amended Federal Rules of Civil Procedure (the second anniversary of their implementation by the Supreme Court is coming up Dec. 1) clearly require enterprises to be responsible for keeping close tabs on all their own corporate records and communications—as well as personal communications created during business hours and/or on business or personal computers. Preordained policies must be in place for storage, security and accessibility of the information.

Often, companies being sued are given only 30 to 60 days to produce such evidence, or else face stiff fines and court costs until the information is produced.

"The effects of the bailout package passed by the House and Senate last week [on the e-discovery industry] are probably going to come in this [fourth] quarter," Karthik Kannan, vice president of marketing and business development for Kazeon, a respected e-discovery software provider, told me.

"In the last couple of years, we've had significant traction and sufficient growth. But we have barely touched the tip of the iceberg in terms of market availability, from an addressable market standpoint."

Kannan said he thinks this Wall Street-centered meltdown clearly will be a further impetus "to get people to call us. We are seeing that more people are adopting a proactive position on information management," he said. "We are also seeing more hits on our Web site the last couple of months."

An e-discovery strategy should be considered a fundamental part of an IT infrastructure, so that enterprises can be prepared—and not just for litigation, but for general data structuring and data management, Kannan said.