Budgetary Constraints? Eighteen Observations on eDiscovery Business Confidence in the Spring of 2020

Editor’s Note: The results of the recent Spring 2020 eDiscovery Business Confidence Survey present the unfortunate impact of COVID-19 on the business of eDiscovery. However, for these pandemic-driven results to be fully understood, they should be viewed through the contextual lens of the results of all eighteen surveys that have been administered to eDiscovery professionals since the inception of the eDiscovery Business Confidence Survey in early 2016.

The Business of eDiscovery in the Spring of 2020

The eDiscovery Business Confidence Survey is a nonscientific quarterly survey designed to provide insight into the business confidence level of individuals working in the eDiscovery ecosystem. The survey consists of nine core multiple-choice questions focused on factors related to the creation, delivery, and consumption of eDiscovery products and services. Additionally, the survey contains three optional questions focused on the business operational metrics of days sales outstanding (DSO), monthly recurring revenue (MRR), and revenue distribution across customer bases.

Specific survey questions include:

• Which of the following segments best describes your business in eDiscovery?
• How would you rate the current general business conditions for eDiscovery in your segment?
• How do you think the business conditions will be in your segment six months from now?
• How would you guess revenue in your segment of the eDiscovery ecosystem will be six months from now?
• How would you guess profits in your segment of the eDiscovery ecosystem will be six months from now?
• Of the six items presented below, what is the issue that you feel will most impact the business of eDiscovery over the next six months?
• In which geographical region do you primarily conduct eDiscovery-related business?
• What are best describes your primary function in the conduct of your organization’s eDiscovery-related business?
• What are best describes your level of support in the conduct of your organization’s eDiscovery-related business?
• How would you characterize the trajectory of your organization’s Days Sales Outstanding (DSO) during the last quarter?
• How would you characterize the trajectory of your organization’s Monthly Recurring Revenue (MRR) during the last quarter?
• Which of the following statements best describes the distribution of your organization’s revenue across your customer base during the last quarter?

Initiated in January 2016, the survey has been administered eighteen times with 2,089 individual responses. The survey is open to legal, business, and information technology professionals operating in the eDiscovery ecosystem, and individuals are invited to participate primarily via direct email invitations. The latest survey was administered in the spring of 2020 and had 172 respondents in roles that included tactical execution (36.0%), operational management (35.5%), and executive leadership (28.5%).Industry segments represented in the survey included law firms (36.6%), software and service providers (29.1%), consultancies (16.9%), corporations (9.9%), governmental entities (4.7%), media and research professionals (1.7%), and others (1.2%). Based on the aggregate results of eighteen past surveys, the following findings and charted overviews of responses to survey questions may help in understanding the collective mindset of many industry experts regarding the business of eDiscovery.

Eighteen Survey Observations

Observations on Business Conditions (Charts 1-4) Business Climate (Chart 1 and 2)

• Just over 68% (68.6%) of eDiscovery Business Confidence Survey respondents felt the current business conditions are good or normal in the spring of 2020. This combined confidence level represents a 22.5% decrease in these same feelings when compared to the winter of 2020 where 91.1% felt the conditions were good or normal.
• Exactly 27.3% of survey respondents characterized the current business climate as good. This represents a decrease from 50.0% of respondents who viewed the business climate as good in the winter of 2020. This significant decrease from the winter of 2020 represents a conservative pessimism in the current general business climate for eDiscovery.
• Almost 31% (31.4%) of respondents classified the current business condition as bad. This represents a strong increase of 22.5% in this area over the last quarter. This is also the highest percentage of respondents viewing the current business conditions as bad since the inception of the survey and represents a distinct cooling of business confidence.
• In the spring of 2020, 37.8% of eDiscovery Business Confidence Survey respondents felt that business climate conditions will be better in six months. This is lower than sentiment in the winter of 2020, where 43.8% of survey respondents felt that the business conditions would be better in six months. This is the lowest percentage of respondents since the inception of the survey who felt that business conditions would be better in six months.
• The number of survey respondents that felt the business conditions will remain the same in six months decreased significantly to 39.5%. This is the second-lowest rating in this area since the inception of the survey and further represents a cooling of business confidence.
• The number of respondents expecting the business climate of eDiscovery to be worse in six months increased to 22.7% in the spring of 2020, up 20% from the winter of 2020. This is also the highest percentage of respondents who felt the business climate will be worse in six months since the inception of the survey, further accentuating the reported cooling of business confidence.

Revenue Expectations (Chart 3)

• In the spring of 2020, 32% of survey respondents felt that revenue in the next sixth months will be higher than today.This percentage is significantly lower than sentiment on this metric in the winter of 2020 (51.4%) and is the lowest rating in this area since the inception of the survey.
• Approximately one-third of the survey respondents (33.7%) felt that revenue in the next six months would not change. This represents a solid 10.8% decrease quarter over quarter from 44.5% in the winter of 2020.
• The percentage of respondents who felt that revenue in six months will be lower than today increased from 4.1% in the winter of 2020 to 34.3% in the spring of 2020. This is the highest percentage of respondents who felt this sentiment in this area since the inception of the survey.

Profit Expectations (Chart 4)

• One-fourth of survey respondents (25%) felt that profits will be higher in six months than they are today. This is a strong decrease from the winter of 2020 when 35.6% of respondents estimated profits to be higher in six months.
• The percentage of respondents who felt that profits will be the same in six months decreased significantly quarter over quarter from 54.1% in the winter of 2020 to 39.5% in the spring of 2020. This represents the third lowest respondent rating in this area since the inception of the survey.
• The percentage of respondents who felt that profits in six months will be lower than today increased dramatically quarter over quarter from 10.3% in the winter of 2020 to 35.5% in the spring of 2020. This is the highest percentage of respondents with this sentiment in this area since the inception of the survey.

Observations on Business Impact Factors (Chart 5) Chart 7: Survey Participant Level of Support Overview 7-Survey-Respondents-by-Level-of-Support-Aggregate

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Chart 8: Survey Participant Industry Segment Overview 8-Survey-Respondents-by-Industry-Segment-Aggregate

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Running Listing of Survey Results

• Spring 2020 Survey (2 April – 15 April 2020)
• Winter 2020 Survey (28 December 2019 – 11 January 2020)
• Fall 2019 Survey (29 September – 17 October 2019)
• Summer 2019 Survey ( 1 July – 17 July 2019)
• Spring 2019 Survey (1 April – 18 April 2019)
• Winter 2019 Survey (27 December 18 – 10 January 2019)
• Fall 2018 Survey (14 October – 26 October 2018)
• Summer 2018 Survey (4 July – 24 July 2018)
• Spring 2018 Survey (7 April – 20 April 2018)
• Winter 2018 Survey (24 December 17 – 15 January 2018)
• Fall 2017 Survey (5 October – 17 October 2017)
• Summer 2017 Survey (6 July – 31 July 2017)
• Spring 2017 Survey (14 April – 1 May 2017)
• Winter 2017 Survey (20 January – 6 February 2017)
• Fall 2016 Survey (11 October – 1 December 2016)
• Summer 2016 Survey (1 August – 31 August 2016)
• Spring 2016 Survey (1 May – 31 May 2016)
• Winter 2016 Survey (15 February – 29 February 2016)

Additional Reading

• Four Eras of eDiscovery? One Approach to Framing Market Growth
• Automating eDiscovery: A Strategic Framework

Source: ComplexDiscovery