The biggest ESI news of the month was the announcement that Consilio and Xact are merging. The big companies in this industry are continuing to get bigger, but so are the little ones. Based on distribution of hiring seen in April (and reflected throughout most of Q1), ESI vendors under 50 million dollars in revenue are hiring at a 1:4 ratio to providers exceeding 100 million dollars in annual revenue. Two years ago, this was wildly disproportionate at an average 1:16 ratio. This means we are about to enter a renaissance for e-discovery boutiques who are capturing not only a greater piece of the business pie, but a meaningful segment of the marquee talent market share.
While this trend is good for small and big e-discovery providers alike, it means that there is a diminishing—perhaps soon-to-be non-existent—middle market for e-discovery providers. Few are left in the lonely abyss between $50 million and $100 million per year in sales, and the ones who do remain tend to sell in short order, buy up other failing companies and then sell, organically trickle up in hopes of reaching the elusive $100 million per year milestone without a change of control event, or hover for years in the abyss. It is becoming increasingly challenging for some middle market players to retain their client services and operations staff as bigger salaries from large companies or promises/allocation of equity at smaller companies continue to effectively lure talent away. For everyone in the market right now, retention does not seem to be as high a focus as talent acquisition and attempting to keep pace with the seemingly never-ending demand for midmarket professionals in e-discovery, namely project managers and analysts.
In May, expect there to be inflation in the cost of project managers in ESI. Right now, the average salary to hire a PM at a vendor is $120K in base compensation. By June, that number will be $140K. At law firms, the average base compensation for a PM is $140K. TRU is already seeing that number creep up to $160K to $170K. The same supply/demand inflation cause and effect will not be true for data processors and technical analysts, however. Project managers are client-facing and generally hard to train and deploy quickly. The mark-up firms and vendors make on their PMs is also meaningfully more than the resource mark-up (if any) on data processing. Instead of paying more money to acquire experienced data analysts, firms and vendors alike are now more willing to teach, train, and mentor entry-level or semi-entry-level (less than 18 months’ experience) ESI data analysts and processors. They have to; it is not fiscally sound to pay top dollar for these hires unless they are a project/contract hire needed for immediate impact. Now is not only the best time for experienced talent to leverage their worth, but the ideal time for someone wanting a career in ESI to make the pivot.
There is one other role that is in equally high demand as project managers and processors: sales pros. This is where large and small providers differ greatly from a strategic talent acquisition standpoint, however. The larger an ESI provider gets, the less likely they are willing to hire someone who cannot generate $4 million or more a year in revenue. The larger providers are also generally willing to pay significantly more for experienced sales reps. Boutiques, on the other hand, are increasingly using equity to lure high earners to their organization, and there are an increasing number of boutiques coming up or soaring in today’s market.
The bottom line in April is that it is a talent-friendly market and there is no end in sight to the unprecedented demand for talent.