Posted by Brian Hill on September 3, 2009
This week, EMC announced that it plans to acquire privately-held eDiscovery vendor Kazeon Systems, Inc. The deal, expected to close in Q3 2009, grew from an existing EMC-Kazeon partnership and will enable EMC to provide a range of natively developed applications to support eDiscovery needs.
As enterprises work to cut eDiscovery costs, the broader market for mitigating legal risk is expanding at a rapid clip. The market, however, remains highly fragmented, with a mix of big players and a multitude of smaller providers. Over the past couple of years, the market has been going through some growing pains and continues to consolidate. In exchanges with a large number of enterprises, buyers report frustrations in integrating applications that support disparate steps of the eDiscovery process – many are also increasingly questioning the long term viability of some of the smaller providers. As larger vendors look to round out and rationalize their portfolios, this consolidation trend holds promise in potentially easing enterprise eDiscovery integration headaches.
So will this deal prove to be positive for EMC customers seeking to mitigate legal risk and drive down eDiscovery costs? My immediate reaction is that the acquisition will be good for both EMC and its customers in the long term. Here’s why:
- EMC significantly expands its eDiscovery portfolio. Integration is a big headache for enterprises in meeting eDiscovery demands. In a Q3 2009 survey that Forrester conducted jointly with ARMA International, 60% of records management stakeholders perceived synchronizing eDiscovery, records management, and archiving efforts to be “challenging” or “very challenging” in meeting eDiscovery needs. These findings are in line with prior broader Forrester eDiscovery survey results and highlight a major common problem that enterprise face in eDiscovery. With this acquisition, EMC has greater potential to improve application integration across different steps in the eDiscovery process.
- EMC gets a significant bump in human capital with eDiscovery expertise. As a global provider of information infrastructure, EMC has extensive experience and capabilities developing products for IT enterprise buyers and effectively selling and marketing to them. On the other hand, the vendor’s bench strength targeting legal teams is far more limited. In a presentation this week, EMC’s Andy Cohen noted that Kazeon currently has 76 employees and 275 customers. If EMC successfully integrates Kazeon’s human capital, the acquisition will bolster the number EMC personnel who can credibly evangelize its eDiscovery offerings to external audiences and to the broader EMC sales force and who can contribute to developing future EMC legal risk mitigation solutions.
- EMC customers now have a clearer idea of the vendor’s direction for identification and collection solutions. EMC’s approach for managing content outside of Documentum for eDiscovery purposes has shifted a couple of times in over the past 2-3 years. During different periods, the vendor has emphasized product approaches (e.g., the now discontinued EMC Infoscape), services engagements linking different EMC offerings, and partner offerings. EMC customers report that this has been confusing. With Kazeon’s purchase price reportedly around $75 million, EMC has clarified its statement of direction for identification and collection solutions to support eDiscovery and brings a sense of stability for Kazeon customers who may have been concerned with the vendor’s financial prospects.
In the near- and mid-term, EMC will need to focus on clarifying its marketing messages and delivering on a revised product road map. Enterprises should exercise caution and closely monitor execution. Here’s why:
- EMC and Kazeon marketing messages overlap. Ironically, both EMC and Kazeon use the term “end-to-end” in marketing collateral. This begs the question of what product portfolio advantages should be expected when “comprehensive” eDiscovery vendors join forces. If I charged one dollar for every time a vendor used the term “end-to-end eDiscovery platform” in briefing me between now and the end of the year, I’d be a rich man. Vendors are making progress in plugging gaps, but in nearly all cases, these claims should be viewed as aspirational marketing statements. Our enterprise clients often report frustration when vendors use marketing terminology like this. They find that it can take a while to sift through the hype to understand what a vendor’s core eDiscovery capabilities actually are. Kazeon brings some important functionality to the table. In completing the acquisition, EMC will need to clarify marketing messages in its broader portfolio for legal risk mitigation.
- The deal will complicate other EMC eDiscovery partnerships. Over the past year, EMC has gone to market with StoredIQ and Clearwell Systems to meet needs for specific steps in the eDiscovery process. These partnerships have resulted in some deals and a few more are in the pipeline, but the number of joint EMC-StoredIQ and joint EMC-Clearwell Systems implementations in production is low. EMC’s Andy Cohen stated this week that EMC will continue to support these partnerships, but made it clear that for eDiscovery the vendor will be going to market with its EMC/Kazeon offerings. I expect that joint EMC deals with StoredIQ, Clearwell Systems, and other partners will dwindle due to perceived competitive conflicts. In February 2009, Kazeon announced analysis and review functionalityas an extension to its “end-to-end eDiscovery functionality.” It will be interesting to see what effect the Kazeon announcement will have on potential partnerships with vendors like CT Summation, CaseCentral, Concordance, FTI, Kroll, Iron Mountain/Stratify, Recommind, and others who provide proven review capabilities in on-premise and/or software-as-a-service models.
- The acquisition entails some overlap in functionality … and needs to be integrated. While Kazeon will bring significant new functionality to EMC’s eDiscovery portfolio, EMC will need to rationalize some areas of product overlap (e.g., legal hold functionality) and deliver on integrating the disparate offerings. Given the effort required to accomplish this, enterprises should have a “trust, but verify” approach in considering combined EMC/Kazeon offerings. It’s one thing for a vendor to acquire useful components and it’s another to integrate them deeply in a unified solution.
Acquiring Kazeon improves EMC’s standing in the eDiscovery market and improves its prospects for delivering effective solutions. Success will require tight portfolio integration, clear and effective communications describing EMC’s expanded portfolio, and retaining key Kazeon personnel.
What do you think the acquisition means for the eDiscovery market? Please write me at email@example.com.
Search Forrester's Blogs
Lead BT Transformation
Develop customer-obsessed strategies to drive growth »
Forrester's CX Index
Predict how actions to improve CX will affect revenue performance.
Measure the customer experiences that matter most »
Forrester's Forum For Technology Leaders
June 2-3, 2015 — Lisbon »