Stock Finds in 'E-Discovery'

12/18/06 - 08:34 AM EST

Katie Dean

As of Dec. 1, the federal rules of civil procedure were amended to include "electronically stored information" as part of the discovery (evidence-sharing) process.

"Those rules had not really been updated to account for digital records," says French Caldwell, an analyst with Gartner. The change essentially means that companies should have a reasonable electronic-records retention policy in place and adhere to it on a routine basis.

The amended rules "will drive short-term growth for reactive e-discovery solutions, while the desire to wrap e-discovery into broader retention management strategies will drive significant market growth for years to come," Forrester's Murphy wrote.

He anticipates market consolidation over the next three to five years -- a trend already in the works. Over the past several years, Pitney Bowes (PBI Quote - Cramer on PBI - Stock Picks) picked up CompuLit, CA (CA Quote - Cramer on CA - Stock Picks) bought iLumin and LexisNexis nabbed Applied Discovery.

First Advantage (FADV Quote - Cramer on FADV - Stock Picks) bought the assets of EvidentData in October, then picked up DataSec earlier this month, both to boost its computer forensics and e-discovery services.

"As long as there are attorneys, there is going to be a market here," Caldwell says.

With many ongoing backdating investigations yet to be completed -- and with all companies facing ongoing management of massive amounts of data -- investors should take time to "discover" this sector.

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