Search Software Gets Boost From New Rules

By SAMAR SRIVASTAVA
The Wall Street Journal
May 16, 2007

Demand for software that can search and locate emails, text messages, videos and spreadsheets is expected to surge in the wake of federal legislation requiring companies to make such information readily available in court proceedings.

In December, Congress passed the Federal Rules of Civil Procedure, accelerating deadlines for companies to identify and describe electronically searchable information that can be used as evidence in a lawsuit. To comply with requests for such electronically stored information during litigation, companies need to have a plan and tools in place.

As a result, corporate spending for electronic-discovery services, estimated at roughly $1.77 billion in 2006, is expected to increase by more than a third to $2.42 billion this year, according to Socha Consulting, a St. Paul, Minn., firm that tracks the market. This comes on top of 37% growth the previous year. Up to 1,000 companies, ranging from a myriad of start-ups to industry titans like International Business Machines Corp. and EMC Corp., offer some form of electronic-discovery software or service.

Prior to passage of the legislation, there were no separate rules governing electronically stored information, emails, instant messages and other electronic data; all were treated like paper documents. In legal proceedings, corporations sometimes argued that electronic information was unavailable or untraceable, legal experts say.

The legislation lays out a clearer path to follow on data retrieval when there are legal disputes about electronically stored information. The rules require that all relevant, nonprivileged and reasonably accessible information that can be used as evidence must be produced. In corporate lawsuits, parties are given 99 days to agree on a formal procedure outlining what information is to be produced, when it is to be made available and the form in which it is sent to the other party. These rules apply to both U.S. and foreign companies that are sued under federal law.

"The changes in the rules have meant that companies need to be prepared early on during litigation," said Ronni Solomon Abramson, an attorney at King & Spalding LLP in Atlanta.

Nicholas Croce, president of Inference Data, a firm that provides electronic-discovery services, said, "Even as the cost of storing data has reduced, the threat of litigation has created a financial justification for companies to spend on electronic-discovery software."

Debra Logan, a research vice president at Gartner Research, said, "Electronic-discovery software eliminates the need to have lawyers conduct extensive data reviews."

The market for electronic-discovery services is split between software and service providers.

Autonomy Corporation PLC, Cambridge, England, this week launched software called Idol Echo, an electronic-discovery tool that tracks the traffic path of individual emails, text messages, instant messages, attachments and video files, and analyzes how the data is used. "By tracking the data within a company, we can track the evolution of ideas within a company," said Nicole Eagan, the chief marketing officer of Autonomy.

Return to Inference in the News