Stock Finds in 'E-Discovery'

The widespread stock-options investigations have forced companies to spend millions of dollars to collect, sift, restore and review massive amounts of old emails and other electronic documents to pinpoint any unscrupulous behavior.

But having to quickly locate important documents is not limited to nefarious cases -- it's part of doing business now. Huge amounts of electronic documents, emails, instant messages and text messages all fall into the record-keeping basket in the digital age, and there is a growing list of rules requiring companies to manage the information.

Thus far, companies that can step in with the tools and expertise to assist in what's called e-discovery and litigation consulting seem to be little known, but they should be on investors' radar.

"This is a booming space that's basically tied to the data explosion that's occurred with digital communications," says Colin Gillis, an analyst with Canaccord Adams who covers several companies that provide e-discovery services. And the options backdating situation "is a good catalyst."

"Interest rates go up and down, technology spending and oil prices go up and down," Gillis says. "High-stakes litigation is going to be around."

With hundreds of tools and vendors, the e-discovery market is fragmented and confusing, making the market size difficult to judge, Forrester analyst Barry Murphy wrote in a December report. He estimates that e-discovery technology spending alone (not including consulting services or forensic work) will jump from $1.4 billion this year to over $4.8 billion by 2011, "as enterprises realize that they have no choice but to prepare for electronic discovery."