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Equivio deal is classic Microsoft – good enough eDiscovery & info governance

equivio logoSo the long-rumoured acquisition of Equivio by Microsoft has finally been confirmed. It the comparatively small world of eDiscovery it caused quite a lot of navel-gazing when news first emerged in October 2014. The price is apparently somewhere in the $150m-$200m, which is chump change to Microsoft but a nice return for Equivio’s investors and management – a multiple of anywhere between 10- and 15-times trailing 12 month revenues, I’d imagine. But what does this mean for the eDiscovery industry?

Firstly, it means a key provider of text analytics has been removed, leaving very few options for those that haven’t built their own analytics as Microsoft is unlikely to continue Equivio’s OEM program once contracts expire. I’d note that Microsoft shut down Fast Search & Transfer (FAST)’s OEM business after it acquired the search and text analytics vendor in 2008. This leaves Content Analyst is the main company offering similar technology on an OEM basis, which gives it great leverage but will also make partners nervous should it get bought too.

Secondly, it means Microsoft will bolster its fairly thin eDiscovery functionality built into Office365. This is classic Microsoft. It waits for a market to prove its viability, then slowly builds basic functionality into the application most closely associated with that business problem – most eDiscovery starts with email and documents, so Office365 is the focus here. It thus starts to squeeze specialist vendors by providing ‘good enough’ functionality for many organisations. It tried the same thing in the archiving market, initially putting archiving features into Exchange Server 2010 and then drip-feeding additional archiving functionality into later version of Exchange and SharePoint and Office365. It’s not a leader in the archiving market but it does enough for those working within a Microsoft-centric environment – and there are still a lot of those.

But beyond the small world of eDiscovery, baking Equivio’s machine learning-based text analytics into Office365 should – as 

The deal is also interesting from an analyst relations viewpoint, because Equivio has not featured in any of the last four Gartner Magic Quadrants for eDiscovery Software. That was either intentional on its part or it didn’t meet the inclusion criteria. Given it didn’t even get mentioned among the companies that didn’t meet the criteria in the 2014 MQ, it makes me think it was intentional (although it certainly wouldn’t have met the criteria in most years either). My experience when I covered the eDiscovery market as an analyst at 451 Research was that Equivio was always very reticent and unwilling to delve too deeply into its technology or its finances when compared to its other privately-held competitors.

Lastly, as the industry convenes at LegalTech in New York in a couple of weeks, the deal will give hope to those specialist eDiscovery vendors that are banking on a large payday through M&A. Alternatively it may cause them angst as they feel they may have missed the M&A boat given most of the big players – notably IBM and HP – have already made their eDiscovery moves.

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