The New Storage Rules

The December adoption of updated Federal Rules of Civil Procedure is forcing major changes in the way solution providers must approach the data storage requirements of customers facing litigation.

And in today's litigious world, that's a lot of customers.

When Joe Kadlec, vice president and senior partner of Consiliant Technologies, an Irvine, Calif.-based storage solution provider, visited New York last month to do his first-ever presentation on the storage requirements of electronic discovery, or e-discovery, the response he received from financial, law and architectural firms was palpable.

One audience member and potential client, in particular, summed up for Kadlec what is on the minds of businesspeople wondering how to handle their data in the face of litigation pressures.

Kadlec related: "An architectural firm's CIO said, 'I'm getting sued over a building we built 12 years ago. I have to get a handle on finding records from 12 years ago. The amount of money it takes to recover not only the data but the applications from 12 years ago. If I didn't have this lawsuit hit me in the face, [the issue] would have gone on the back burner.' "

Randolph Kahn, founder of Kahn Consulting, an information management consulting firm in Highland Park, Ill., that specializes in legal consulting, said e-discovery has become an important customer issue in the past few years.

"E-discovery confounds just about any organization that has litigation," Kahn said. "Anyone selling technology solutions must be aware that compliance problems are at the top of the priority list for IT management today. In the last few years, e-discovery has taken center stage as organizations face the significant burden, expense and hassle of finding and processing all information related to the case."

Forrester Research estimates that spending on e-discovery activities will rise by an average of 22 percent annually to hit almost $4.9 billion by 2011, up from an estimated $1.5 billion in 2006. That spending covers everything, including computer forensics, a specialized service for collecting information from a desktop PC or data storage device; tape cataloging and restoration; extracting data from a data center; and document management tools aimed at providing information lawyers can use.

Cross-Examining E-Discovery

Despite its potential size, e-discovery is still a niche market, said Gary Fox, national practice director for data center and storage solutions at Dimension Data North America, a New York-based solution provider.

"There are a lot of tools, but they're not complete," Fox said. "Applications for archiving are still highly customized."

But it's a market that solution providers need to watch more closely, especially after a Supreme Court ruling in mid-December that broadened the potential scope for legal discovery, said Dan Carson, vice president of marketing and business development at Open Systems Solutions, a storage solution provider in Willow Grove, Pa.

The new changes to the Federal Rules of Civil Procedure address the fact that more of a company's information is likely to be kept in an electronic format, and specifically it mentions "electronically stored information" as a category for the first time as well as details what data can be kept or deleted and the format in which it must be made available for litigation.

"It was a big change," Carson said. "Before, what a company did with its information was according to company policies. But the Supreme Court said, 'No, information needs to be treated as part of the e-discovery process.' It said company policies do not exclude anyone from discovery policies. This caused us to look more at this space."

Very few, if any, solution providers can provide a full range of services related to e-discovery. Some areas require very specialized skills, such as computer forensics, while other areas require legal expertise.

However, many solution providers have begun working with customers to define new ways to store, archive and retrieve data, either as part of an overall e-discovery process or as the primary basis for e-discovery.

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The fact that e-discovery is so closely tied to storage is driving storage solution providers such as Open System and Consiliant to move into this new business.

For Consiliant, the decision came after looking at all that data on customers' tapes and realizing that finding requested data in a short time frame is nearly impossible, Kadlec said.

"We're trying to take a technology solution to help $100 million-plus companies save money," he said. "When they are hit with litigation, they want to find data within days and say, 'Oh my God, here's the smoking gun, we better settle,' or say, 'Here's the data, we have a case.' "

E-discovery starts with storage hardware, said Benjamin Woo, vice president of sales and marketing at ASI System Integration, a New York-based solution provider.

"If you don't have a good, solid, simple way to provide compliant storage, the rest is irrelevant," Woo said. "Customers have to get their storage taken care of, then they can look at what they need if they get sued. It's a basic function of ILM [information life-cycle management]: You need to identify the different parts of data, classify them and then search them."

Once the basic storage infrastructure is set up, it is important to work with customers to set policies about what data to keep and for how long.

Answers to those two questions depend on the type of data and how important it might be to future litigation. The Federal Rules of Civil Procedure provide something of a guideline in Rule 37, which states, "Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system."

To further define what stays and what goes, a solution provider likely will find itself working with the customer's legal staff.

"Lawyers say they want to get rid of all data ASAP," Dimension Data's Fox said. "If the customer doesn't have the data, they don't need to produce it. But it depends on the industry. For financial guys, lawyers say the faster they get rid of it, the better. But for compliance, they may need to retain the data for years. I don't see any easy answer to the question."

Making The Case

E-mail management is not only one of the most urgent issues for companies concerned about liability, but it is also a prime opportunity for solution providers, said Scott Robinson, CTO of Datalink, a storage solution provider in Minneapolis.

About 32 percent of businesses have not yet begun to implement an e-mail strategy that accounts for e-discovery requirements, while only 43 percent have just begun such an implementation, according to a survey conducted last year by AIIM, the Enterprise Content Management Association, Silver Spring, Md.

ASI works with Symantec Enterprise Vault to help customers with data management and e-mail management, Woo said, but he admits the software is not for every business.

And technology isn't the panacea.

While e-mail archiving is a good way to get involved in e-discovery, solution providers run the risk of installing a product only to have a customer come back in six months or a year because their e-mails are not being archived according to policies, said John Merryman, senior consultant for the strategy delivery practice at GlassHouse Technologies, a Framingham, Mass.-based IT consultant.

This problem stems in part from the divide between customers, who need solutions that comply with very specific policies and strategies, and vendors, who want to drive product sales.

"Customers may set a policy to purge e-mails after five years and then find out they need to keep them longer," Merryman said. "Or they migrate their e-mail to a new system and keep the e-mails forever. There's also a big risk in keeping them too long."

Talking to customers' legal departments is just as important as or more important than talking to their IT departments, Fox said.

"A lot of the time, we talk to customers' legal people about when to start and the impact on different parts of the company," he said. "The legal side has its needs, the IT side has its needs. We need to bring them together."