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E-Mail Archiving Growth Fueled by Federal Rule Changes
December 17, 2007
Changes to the U.S. Federal Rules of Civil Procedure (FRCP), which became effective Dec. 1, 2006, were not welcomed by financial services firms. The rules, among other things, require companies to have enterprisewide retention policies in place for all electronic communications. But in an important corner of the information technology business--e-mail archiving solutions--the changes have created a giant opportunity for vendors.
The updated FRCP, now one year old, is driving new, innovative e-archiving systems and spawning a second generation of products that are rapidly gaining market share.
Because of its heavy use of electronic communications and high degree of regulation, the securities industry has historically been the focus of e-discovery companies. "The market got started with financial services, mainly because of regulation," notes Sara Radicati, president and CEO of Palo Alto, Calif.-based Radicati Group. "The initial focus was on recovery." A new generation of products is "focusing on better search techniques and more fine-tuned ways to search."
According to a study of e-mail archiving vendors released in July by Radicati, the percentage of corporate mailboxes protected by archiving solutions is estimated to grow from 14 percent this year to more than 70 percent by 2011. The total e-mail archiving market--including North America, the biggest spender in this area--is expected to reach almost $1.3 billion by year-end, and grow to over $6 billion by 2010, says the study.
A report from IT research firm Gartner in Stamford, Conn.--"E-Mail Active Archiving Market Update, 2007"--foresees the e-mail archiving business growing at a five-year compound annual growth rate of 37.2 percent, reaching $1 billion in new license sales by 2011.
As the Gartner study notes, the mailbox management system that a firm uses is a huge factor in its selecting an e-mail archiving product. Customers of the three major systems--Microsoft Exchange, IBM's Lotus Domino and Novell's GroupWise--are likely to seek e-mail archiving solutions that are compatible with what they're already using.
"The common technology is the driver for archiving solutions," says Stephen O'Malley, managing director of New York-based FTI Consulting and a specialist in electronic evidence consulting. "What makes the solutions successful is the ability to integrate with as many technologies as possible. Companies will not want to revamp their e-mail solution to be compatible with the archiving solution."
While there are currently hundreds of companies in the e-mail archiving space, consolidation is whittling them down to a relatively small number of leading providers. The Radicati study lists 16 key companies, which it divides among mature players, top players, specialists and trailblazers.
Two vendors singled out by FTI Consulting's O'Malley are Cupertino, Calif.-based Symantec Corp. and EMC Corp. in Hopkinton, Mass. "Both product lines have a wide customer base," he says, "driven by the ability to connect the solution with other types of technologies." Symantec offers a comprehensive suite of user-friendly archiving solutions, while EMC provides extensive storage capability, and the ability to access it relatively quickly. A large part of EMC's customer base is generated by that ability, O'Malley says.
Gartner identifies three companies--Symantec, EMC and Zantaz--as reporting more than $10 million in new license revenue in 2006. Zantaz, the newest of the three companies, founded in 1996, was acquired in July 2007 by Autonomy, an enterprise software provider based in Cambridge, U.K. and San Francisco. Zantaz, which operates as an independent subsidiary, offers a product suite that encompasses consolidated archiving of all electronic information sources, including e-mail, instant messaging, enterprise systems, voice and video.
On Dec. 3, Zantaz unveiled a new product, Desktop Legal Hold, specifically designed to help customers comply with the FRCP. It preserves e-information locally and continuously in real time, locking original files in place until a network connection is established.
"In financial services, a number of executives are not on the premises, and carry laptops," says Nicole Eagan, chief marketing officer of Autonomy. "The challenge is how to protect e-mails as well as files. Zantaz takes a radically different approach: We have software on the laptop, and can send out a request to all relevant laptops or desktops." Desktop Legal Hold is suitable for large organizations, including those in a financial services environment, she adds.
Noting that her company's biggest competitors are Symantec, EMC and Boston-based Iron Mountain, Eagan says that the industry is seeing a lot of consolidation. "There is a change from niche solutions to an integrated approach, where everything works together," she notes. Autonomy's number-one market is financial services, says Eagan, noting that 14 of the top 20 global securities firms are customers.
While e-archiving giants are setting the pace, some vendors are still looking for niches to exploit. Jatheon Technologies of Toronto has launched a collection of appliances geared to the financial services industry that uses global resellers to deliver the product to the end user. "Rather than come out with a software solution, with complex integration issues, we sell a family of appliances that goes into the network," says Kieron Dowling, president and CEO of Jatheon. "The next step is to add features and functionality, and work with channel partners to gain market share."
Other vendors with appliance-based approaches include Campbell, Calif.-based Barracuda Networks and ArcMail Technology in Shreveport, La.
According to O'Malley, the leaders of the e-archiving technology race increasingly will be companies that offer flexible, one-stop solutions that feature extensive storage capability and quick retrieval. "One of the biggest complaints today is the speed with which the system comes back with search results," he says. "In financial services, firms need to know where the information resides within the infrastructure. Another consideration: Is there flexibility in the tool? A key driver is the solution's ability to manage large volumes of information."
E-mail archiving "has basically become a huge information management problem," adds Radicati. "The whole search issue is becoming more important. We are moving from just trapping the information to how to store and access it."
Also, she continues, "there is a lot more concern about capturing other types of information exchanges, such as instant messaging. Going forward, there is concern about voice communications--extra careful companies may wish to archive these. ... Financial services is the industry that is on the leading edge of this."
While "the tools haven't changed all that much," O'Malley agrees that the big changes involve how companies are storing the information, and the ability to index and retrieve it. "Once you retrieve information, you want technology to extract and provide it very swiftly," he explains. "All the companies have the collection part down. The real visionaries can identify relevant information, extract it quickly, and move it to a litigation platform."