Several blog and news sites have commented on the acquisition activity in the email archiving and electronic discovery markets. Tech Target's Search Storage site reports: "storage analysts say (Google's acquisition of Postini) could be the beginning of a shift in the email archiving and e-discovery markets toward outsourced, Web-based Software as a Service (SaaS)." (I listed many of the acquisitions at the end of this blog post.)
I saw a succinct summary of the trend in the High Contrast blog. It reported:
- Outsourcing of content archiving, which often means
- Outsourcing of e-discovery, which is why we see
- Search players buying hosted content archiving companies
What is driving the outsourcing market? Are enterprise customers handing over their data in droves?
I talk to enterprise email decision makers every day. They tell me that it is fine to outsource incoming email. After all, this mail comes from the Internet anyway. However, these same customers tell me that they are afraid to outsource their outbound and internal email handling. (Internal email is email in which all the senders and recipients are within a company.) Generally, there are two reasons given:
- It is dangerous to let a third party hold your most confidential email, which includes much of the internal email. If the third party receives a subpoena for your mail, would they fight the request on your behalf when they have nothing to gain by fighting? Or, would they cooperate with authorities (or the other side) to protect their interests?
It can get worse. For certain types of investigations, it may be illegal under the Patriot Act for the third party to tell you of the search for your email.
- The amount of network bandwidth required to send internal mail to an outsourced provider is enormous. Companies like Postini can easily archive external mail by intercepting it before it reaches you. But, internal mail must be routed to the outsourced vendor, which can more than double bandwidth costs.
If you are already using Google for your business email, then the Google/Postini match is ideal in regards to bandwidth utilization. All the mail is at Google anyway. But, companies with their own email systems cannot afford the Internet costs for shipping that much mail to Google for processing.
These reasons make sense. Therefore, while I believe that the Google/Postini marriage helps the viability of Google Mail, I do not see enterprise customers willingly handing over their precious internal email to a third party. So, I have to wonder if all of this acquisition activity is being driven by investors in love with the outsourced business model -- not the enterprise customer.
Below is some of the examples of the recent activity reported in High Contrast:
- Symantec bought
- Veritas (July 2005), which bought KVS, an email archiving and discovery company. (Aug 2004) KVS’s technology has been packaged into managed service offerings since 2004 by companies such as AT&T.
- IMLogic, an IM security/archiving company (Jan 2006)
- Iron Mountain, once a boxes-on-trucks-and-in-caves company, bought online backup player Connected (Oct 2004), put its leadership team in charge of Iron Mountain Digital and set out to create the most scalable outsourced digital content discovery and archiving platform.
- Autonomy, one of the key players in enterprise search, bought discovery and archiving vendor Zantaz last week for $375M, which in turn had bought hosted e-discovery vendor Steelpoint. (Aug 2004)
- Yesterday Google announced it will acquire Postini for $625M, a hosted content discovery, security and archiving player.
- Even Tumbleweed wants to buy a hosted email archiving vendor.
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