Category Archives: SaaS

Usage-Based Pricing Model Increasingly Driving eDiscovery Software Growth

by John Patzakis

Legal Tech software CEOs often grapple with two competing challenges: Growing revenue in a manner that supports how customers buy their products for their individual cases, while at the same time maximizing shareholder value by recording recurring revenue, which the investor community typically favors. Recurring revenue generally comes in the form of fixed annual or monthly subscription licenses.

However, eDiscovery software providers are increasingly aligning their SaaS pricing strategy with the amount of product usage their customers consume. Instead of paying a fixed rate, the pricing is based upon actual usage. The benefits of this approach include a shorter and simpler purchasing process and increased customer satisfaction and retention.

In the eDiscovery space, customers often prefer to pay by “matter”, i.e., per lawsuit or legal case. Law firms and service providers typically utilize eDiscovery SaaS software specific to an individual case on a pass-through cost basis, where their end-client ultimately pays for the services. In the case of corporate law departments, oftentimes the organization prefers to purchase annual subscriptions for eDiscovery and apply the license over multiple matters in the course of the year. However, such buying decisions vary by organization, with corporate counsel sometimes deferring eDiscovery workflow and tech decisions to their law firms, which favors a usage-based pricing model.

While tech companies with recurring annual term revenue will typically garner higher valuations, eDiscovery software firms with usage-based pricing models are now seeing similarly elevated valuations. Investors are recognizing the very unique economics and buying dynamics specific to the eDiscovery software space. But it is incumbent on eDiscovery software execs, their investment bankers, and board members to educate the broader market on this dynamic unique to the eDiscovery space. In some situations, investors new to this space attempt to apply a steep discount to usage-based SaaS revenue, as it doesn’t fit in with their “paint by the numbers” ARR models. Rick Weber, Managing Director of Legal Tech investment banking firm Arbor Ridge Partners notes, “while the usage model is not annual recurring, it is ‘monthly re-occurring,’ and thus projections and modeling can be made based on company history and industry norms and should be treated like ARR contracts.”

In fact, usage-based pricing is now gaining wider acceptance in the broader SaaS software market beyond legal tech. Cloud infrastructure providers AWS and Microsoft Azure are obvious examples of successful usage-based pricing strategies, but many startups and medium sized companies have successfully implemented the model as well. While usage-based revenue may seem less predictable compared to other pricing models, companies using this model are often growing faster, retaining more revenue, and valued at high revenue multiples. But again, this realization requires a closer look by investors and an intelligent education effort by the companies and their advisors.

One caveat for investors is to confirm that the value of the SaaS usage offering is mostly based upon proprietary software tech versus services that are dressed up as SaaS. Some eDiscovery service providers attempt to position their services as SaaS, without a true standalone propriety software component. An analysis of the cost of sales/gross margins and assessment of the actual proprietary nature of the software is determinative. Gross margins should be at least 80 percent. And while some services are often provided in conjunction with a SaaS usage-based offering, a qualifying factor is whether the software is also separately offered purely as a traditional license to end users without any services required, which is how many customers will opt to buy.

But for true usage-based SaaS offerings, the flexibility, simplicity and supporting of legal customers purchasing dynamics are key to rapid growth and customer satisfaction. As summarized by Weber, “many of the PE firms and investors that have made big bets on such companies in recent years seem to understand the nuance and opportunity while many still lag behind and simply need to think outside of their box.”

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Filed under Best Practices, Cloud Data, Corporations, eDiscovery, Enterprise eDiscovery, Information Management, SaaS, Uncategorized

Relativity Product Team Highlights Compelling X1 Integration for ESI Collection

By John Patzakis

Recently we hosted a webinar with Relativity highlighting the very compelling integration of our X1 Distributed Discovery platform with the RelativityOne Collect solution. This X1/Relativity integration enables game-changing efficiencies in the eDiscovery process by accelerating speed to review, and providing an end-to-end process from identification through production.  As stated by Relativity Chief Product Officer Chris Brown: “Our exciting new partnership with X1 highlights our continued commitment to providing a streamlined user experience from collection to production…RelativityOne users will be able to combine X1’s innovative endpoint technology with the performance of our SaaS platform, eliminating the cumbersome process of manual data hand-offs and allowing them to get to the pertinent data in their case – faster.”

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The webinar featured a live demonstration showing X1 quickly collecting data across multiple custodians and seamlessly importing that data into RelativityOne in less than two minutes. Relativity Collect currently supports Office 365 and Slack sources, and this X1 integration will now enable Relativity Collect to also reach emails and files on laptops and file servers. Relativity Senior Product Manager Barry O’Melia commented that the integration with X1 will “greatly streamline eDiscovery process by collapsing the many hand-offs built into current EDRM workflows to provide greater speed and defensibility.”

ComplianceDS President Marc Zamsky, a customer of both X1 and Relativity, recently commented that the “ability to collect directly from custodian laptops and desktops into a RelativityOne workspace without impacting custodians is a game-changer,” which will “reduce collection times from weeks to hours so that attorneys can quickly begin reviewing and analyzing ESI in RelativityOne.”

The live demonstration performed by O’Melia highlighted in real time how the integration improves the enterprise eDiscovery collection and ECA process by enabling a targeted and efficient search and collection process, with immediate pre-collection visibility into custodial data. X1 Distributed Discovery enhances the eDiscovery workflow with integrated culling and deduplication, thereby eliminating the need for expensive and cumbersome electronically stored information (ESI) processing tools. That way, the ESI can be populated straight into Relativity from an X1 collection.

The X1 and Relativity integration addresses several pain points in the existing eDiscovery process. For one, there is currently an inability to quickly search across and access distributed unstructured data in-place, meaning eDiscovery teams have to spend weeks or even months to collect data as required by other cumbersome solutions. Additionally, using ESI processing methods that involve appliances that are not integrated with the collection will significantly increase cost and time delays.

So in terms of the big picture, with this integration providing a complete platform for efficient data search, eDiscovery and review across the enterprise, organizations will save a lot of time, save a lot of money, and be able to make faster and better decisions. When you accelerate the speed to review and eliminate over-collection, you are going to have much better early insight into your data and increase efficiencies on many levels.

A recording of the X1/Relativity integration webinar can be accessed here.

With the ability to search and collect emails and documents across up to thousands of endpoints and network sources with industry-leading speed, X1 Distributed Discovery revolutionizes enterprise eDiscovery. For example, X1 empowers legal and consulting teams to iterate their search parameters in real time before collection, providing a revolutionary true pre-collection early case assessment capability. Additionally, with its intelligent collection capability, X1 performs instantaneous data processing (culling, de-duplication, text and metadata extraction, etc) in a fully automated manner.

And with the integration with Relativity, the X1 platform is even more compelling. As Marc Zamsky exclaimed “My clients are going to love this!”

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Filed under collection, eDiscovery, Preservation & Collection, SaaS, Uncategorized