E-DISCOVERY FIRMS FIND BUSINESS LOOKS BETTER IN EUROPE
E-discovery companies, which help lawyers search through mountains of electronic data, are starting to establish beachheads abroad as the American market fills up with cut-rate competitors.
Chicago-based Inventus picked up two companies in London this year. Huron Consulting Group made two e-discovery hires in its London office in June, including a senior director of U.K. client services to drive European business performance.
DTI, a privately held Atlanta company with $500 million in revenue that employs about 250 people in Chicago, closed on a deal in June that landed it offices in the United Kingdom, Ireland and the Pacific Rim. And Mark Williams, Chicago-based president of privately owned Kroll Ontrack, says the company has opened a data center in France and plans to continue expanding next year in Europe, Asia and possibly Brazil.
During a July call for investors in Chicago's publicly held Huron and Navigant Consulting, which also does e-discovery, Williams said overseas markets are “the fastest growing part of our business, hands down,” with fewer “small companies sort of nipping at our toes.”
Palo Alto, Calif., market research firm Radicati Group predicted in December that the market for e-discovery technology would grow to $3.8 billion in 2018 from $1.6 billion in 2014. The process has been commoditized in the United States, says Monte Summers, a founding partner of Chicago e-discovery boutique BlueStar Case Solutions. By contrast, the European market is less mature, making companies hungry to grab more of it.
“It's like a gold rush,” he says.
But the lure of Europe goes beyond pricing. Many countries have data privacy laws that compel e-discovery companies to have a physical location in the country to serve their U.S. customers. Moreover, the volume of electronic data in lawsuits in the U.K. and Ireland is increasing, creating a need for services that didn't exist before.
Only four European countries—the U.K., Ireland, Malta and Cyprus—include discovery as part of the civil legal process, and even there “e-disclosure” is more limited in scope than in the United States. But American litigants are recognizing that companies may store relevant information on servers based overseas, says Brian Hengesbaugh, a partner in the Chicago office of law firm Baker & McKenzie. Since the privacy laws of many European nations erect barriers to sending data outside their borders, e-discovery companies will set up a brick-and-mortar operation in the country to serve American clients.
Inventus acquired British legal process outsourcer Unified in March and project management software developer Kooby three months later. In addition to serving its U.S. customers overseas, the company is serving Unified's clients in the United States, Inventus CEO Trevor Campion says. Companies doing business in the United States must comply with U.S. discovery practices, and even complying with more limited e-disclosure requirements in the U.K. and Ireland has grown difficult, given the sheer volume of documents, emails, social media postings and the like that require review.
“The discovery matters are becoming more U.S.-like,” he says. “The burden of data is growing exponentially, and that's what's fueling this massive growth (of e-discovery companies) internationally.”
Campion declines to give revenue for the privately held company but forecasts 60 percent growth for the year.
Yet even as e-discovery companies see opportunity, they must confront suspicion over who's interested in those petabytes of data, as well as the realities of selling a service that customers haven't needed before. Edward Snowden's revelations about the National Security Agency touched a nerve, Hengesbaugh says. European clients feel uneasy about massive amounts of data being reviewed, even if the NSA doesn't care about “what the pricing discussion was on somebody's email,” he says. “The mistrust is misplaced, but that doesn't mean it's not there and not real.”
Even harder may be educating potential customers about the value of e-discovery services. Hengesbaugh recalls speaking at a conference in London several months ago. When the audience broke into discussion groups, most had 30 to 40 people. The e-discovery group had four. “It was a lonely, lonely table.”
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