Despite the recessionary period that decimated many industries, Santa Monica-based market research firm IBISWorld estimates that revenue for the e-discovery consulting services industry has increased a strong 9.4 percent annually on average to about $1 billion over the five years to 2012. “During that time, the industry has benefited from the rising ubiquity of digital communication, which has increased the amount of electronically stored information,” says IBISWorld industry analyst Kevin Culbert. “The industry has grown as more individuals and businesses use text messages, social media and e-mail as primary means of communication.” Rising electronically stored information has pushed up demand for e-discovery as a proportion of all discovery services, which is the legal process in which each side of a lawsuit obtains evidence from the opposing party.
During the five years to 2012, the industry’s growth has largely been caused by an increase in private investment in computers and software and a rising percentage of services conducted online. During that time, Culbert says “the total annual expenditure by businesses on all information processing equipment and software has increased and the percentage of services conducted online has also risen.” The e-discovery consulting services industry’s growth has also been boosted by an increasing popularity of smartphones that has effectively driven up the number of mobile internet connections, which have skyrocketed over the past five years. In fact, the number of mobile internet connections has expanded at a whopping 59.9 percent per year on average from 2007 to 2012. These growth factors have caused industry demand to rise as electronic communication has become increasingly integrated into today’s society. The continued proliferation of electronic communication is expected to boost industry revenue 9.3% in 2012, according to the “e-Discovery Consulting Services in the US” industry report that IBISWorld published last week.
As a technology-based industry, research and development activities are high for e-discovery service providers and software developers. Top-tier companies spend millions of dollars annually to write new programs and develop innovative solutions to data retrieval, processing, management and review. Because e-discovery services and software operate in conjunction with existing technologies, like web-based applications and phone systems, keeping up-to-date with these external operating environments poses a major challenge. The recent proliferation of social media and expanding popularity of mobile technology also presents challenges as well as opportunities for industry firms to exploit. Current major players in the e-discovery consulting services business include Kroll Ontrack, FTI Consulting Inc. and Fios Inc.
In the five years to 2017, IBISWorld estimates that industry revenue will continue to increase, albeit at a slightly slower rate than the past five years. Industry operators will continue to benefit from the increasing use of electronic communication and need for electronically stored information. Steadily rising smartphone adoption will continue, too, pushing up the number of mobile internet connections by a still-strong rate of 11.9 percent per year on average to 292.9 million connections by year-end 2017.
In spite of rising demand, firms that specialize in e-discovery consulting are expected to face increasing competition from companies that develop e-discovery software, such as Autonomy Corp. and Symantec Corp. More industry operators are expected to be acquired by large software companies that are attempting to create a one-stop shop for e-discovery services. Still, the number of firms operating in the industry – currently at 441 – is expected to increase annually on average in the five years to 2017. Rising competition is expected to contribute to price competition among industry participants, a factor that will hamper profit growth in spite of rising demand.