In 1987, there was one business dedicated solely to providing electronic data discovery (EDD) services. In 1992, there were about five more. In 2000, there were about 40. Today, there are over 600 offerings, or purporting to offer, these services. They range in size from very large enterprises, to one or two people.

So say George Socha and Thomas Gelbmann, two St. Paul-based law technology consultants who have studied the wildfire expansion of the EDD industry for the past five years.
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Their latest report, entitled the Socha-Gelbmann Electronic Discovery Survey Report, concludes that in calendar 2006, commercial EDD revenues were about $2 billion, up 51 percent from 2005.
Socha was approached in spring 2003 by a firm providing EDD, among other services, to study the status quo, potential growth, key issues and trends within the industry. That firm was looking to expand the scope of its EDD services, but wanted to be sure the market was strong.

To their surprise, no market research firm had ever examined the industry, and those it had discussed the idea with said that, because it was such a new area, they would need to spend time learning the industry first before commencing a study. That was too costly a proposition.

Socha, a former litigator who, at the time, was transitioning into a law tech consulting practice, asked Gelbmann to help him. Gelbmann, an independent law tech consultant, had worked as an IT professional in Minneapolis law firms for over 20 years, but he also had experience in market research within the legal field.

Although the two also have private consulting practices, they say the report is a massive annual undertaking. This year’s report is 334 pages in length, with hundreds of supporting tables and charts.

The two begin their work in October, inviting over 1,000 people to participate. They send them extremely detailed spreadsheet questionnaires, and conduct lengthy interviews with each. In April, they begin their analysis, inserting the data into models and doing some fact-checking or “triangulation” to verify data. Then in June, they write the report.

The findings, not surprisingly, are quite different, when comparing that first report released in 2003, versus 2007’s.

Socha says, “The market is much larger now; there are many more dollars spent; and there are many, many more players, both as active providers and active consumers of EDD services. There is a much more widespread appreciation and understanding about what goes into electronic discovery, and why you might care about it in the first place. The market has more structure than five years ago; there are more clearly identifiable stages in the process; and there are much more advanced methodologies and tools.”

Gelbmann adds that they’ve seen issues evolve among the providers of EDD over the years – namely, the need for standardization and better project management.

While growth has slowed down slightly in recent years, EDD remains a “very, very aggressive growth market,” he states.

Five years ago, with fewer players in the field, a limited number of providers was charging fees that yielded healthy profit margins, says Socha. Nowadays, with more competition, profit margins are lower. Many firms continue to enjoy healthy bottom lines, although smaller or midsized competitors are getting more of the work they might have had in the past; and some EDD providers are scrambling just to stay solvent.

“The pie has gotten bigger, but so has the number of individuals who want a slice, and therefore the slices are getting smaller,” Socha observes.

What hasn’t changed over the years is that the top concern among EDD providers and consumers alike is the need for better project management.

Gelbmann explains, “It’s all about communication. A lot of times, the consumer comes in with a whole lot of data and has no idea what’s needed, or what’s going to happen and when.
“Project management is about communicating a plan – how they’ll get from Point A to Point B – with all the interested parties. It’s also about designating whom to discuss any anomalies with, because no project goes exactly perfectly. But with good project management, there should be fewer bumps along the road.”

EDD Survey report
Other key findings by St. Paul law technology consultants George Socha and Thomas Gelbmann:

• The top 30 providers collected revenues of about $1.08 billion.
• An additional 550-plus vendors accounted for another $592 million.
• Judging from consumer and provider expectations, the market should grow at approximately 33 percent from 2006 to 2007, 28 percent from 2007 to 2008, and 23 percent from 2008 to 2009.
• Translated into dollars and cents, this means the EDD market will exceed $4 billion by 2009.