eDiscovery Services Are Undergoing a Major Transformation

By John Patzakis
September 8, 2021

Recent research from industry analyst Greg Buckles at the eDiscovery Journal highlights soaring valuations for eDiscovery tech firms. For the first time in the history of the industry, multiple eDiscovery tech firms have gone public in a single year, and by my count, there are at least seven tech “Unicorns” (a company with at least a billion dollar valuation) in the space. Relativity leads the way with at least a $3.6 billion valuation based upon their latest financing.

Yet while technology-based providers are seeing escalating valuations, valuations and M&A activity for pure services firms are conversely softening. This is because tech automation is finally catching up to this space. Traditional eDiscovery services typically involve manual collection, followed by manual on-premise hardware-based processing, and finally manual upload to review. These inefficiencies extend projects by often weeks while dramatically increasing cost and risk with many manual data handoffs. However, the first half of the EDRM involving collection and processing are now far more automated than they were even a few years ago. For instance, the one aspect of eDiscovery tech that is actually seeing decreasing usage and revenues are standalone processing appliances. This is because these tools are dependent upon the efficient manual services model prior to ingestion and also post import.

However, the latest in eDiscovery collection technologies will now combine targeted collection with previously manual processing steps that are performed “on the fly” and in the background so that the data is automatically collected, processed and uploaded into a review platform such as Relativity in one fell swoop. Better yet, processing is now free with RelativityOne. The automation Relativity is engineering, including with their integration with X1, along with innovations by other review platforms, is rendering traditional eDiscovery processing tech obsolete, along with manual collection and processing services. The purchasers of eDiscovery services and software have clearly noticed and are demanding adaptation from vendors.

So how can services firms adapt to the inevitable? Here are few strategies:

First, services firms should move upstream to focus on information governance and privacy consulting. The new generation of eDiscovery technology enables convergence with privacy (i.e. GDPR compliance) information security and many other information governance use cases. This convergence requires high-end strategic consulting to bring these processes together and operationalize them. This also enables services firms to develop direct and ongoing relationships with corporate law departments, IT and other key corporate stakeholders.

Second, data analytics consulting, which is already a prominent offering by many firms, is ripe for further expansion. This is because analytics for eDiscovery is becoming more advanced and user friendly, and thus is able to be applied across the eDiscovery workflow, including pre-collection analytics and information governance.

Third, services firms should find ways to develop or otherwise acquire their own differentiating tech or establish meaningful partnerships with tech platform providers. These partnerships should entail more than merely using the software, but the development of proprietary workflows or even technical integrations that enable unique service offerings.

At the end of the day, eDiscovery is a technical process that is subject to technology disruption just like any other technology-based services industry. eDiscovery services firms that not only adapt to but embrace this change as a strategic opportunity will be the ones who prosper the most.