Iron Mountain acquires Stratify for $158M

Iron Mountain will add legal processing to its e-discovery services through the purchase of its legal review partner.

Iron Mountain Corp. brought its legal processing and review partner Stratify Inc. into its developing digital archiving business today, acquiring the startup for $158 million.

Stratify is one of the larger e-discovery service providers at the production end of the Electronic Discovery Reference Model (EDRM). Iron Mountain's data retention services fit into the first half of the process, generally defined as preservation. (For more on e-discovery products and how they fit into EDRM, see our e-Discovery Special Report Product Roundup). The company had an estimated $30 million in revenue this past year, had hundreds of terabytes of data under management and claims several Fortune 500 and AmLaw 200 customers.

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Iron Mountain has made 17 acquisitions this year totaling around $500 million, two of them in an effort to ramp up its digital division after the reputation of its traditional tape transport and records management businesses have taken hits over security breaches and records-warehouse fires. There is some evidence that large companies are moving away from Iron Mountain for security reasons, though analyst Brian Babineau of Enterprise Strategy Group (ESG) said the Stratify acquisition could make staying with Iron Mountain more persuasive on that front.

"By bringing in their legal review partner and making it a one-stop shop, Iron Mountain is eliminating chain of custody issues that come along with forwarding data they've retained to a third party for review," Babineau pointed out. "Accessing data for review is also one of the biggest reasons users request restores from Iron Mountain, and that's also where most of the costs are to the end user."

Legal review is notoriously expensive, often costing as much as $2,000 per gigabyte of data hosted by a legal review service provider per month. By bringing both the preservation and review parts of the process under one umbrella, Babineau said, Iron Mountain could find new ways to make the process more efficient from one end to the other, reducing the amount of data that needs to be submitted for review and further diminishing costs to the end user.

Babineau also pointed out that despite the recent bad publicity for Iron Mountain, its revenues are continuing to grow. During its quarter earnings call today, Iron Mountain reported revenues increased 18% year over year to $702 million last quarter and revised its earnings forecast up for the remainder of the year. Part of the increase was due to earnings from 2007 acquisitions ArchivesOne Inc. and RMS Services -- USA Inc., businesses the company didn't have a year ago.

The latest acquisition brings Iron Mountain into competition with legal service providers (LSP) that host and review data for litigation support and another data archiving company, Autonomy Zantaz, which also provides services in both halves of the EDRM model. The Stratify deal will also increase Iron Mountain's competitiveness with Google, Inc. by boosting its search capabilities. Google made a move onto Iron Mountain's turf with the acquisition of Postini Inc. in July.

Stratify products are in the areas of legal search and discovery, email analytics and a digital repository to manage data needed for litigation.

Stratify will be run as a separate division within Iron Mountain Digital. All of the employees of the company will be retained, including CEO Ramana Venkata, as will the company's offices in San Francisco, Boston and Bangalore, India.

"We love the fact that Stratify is also a hosted service provider, but that wasn't the key factor in this acquisition," said John Clancy, president of Iron Mountain Digital. Stratify was founded in 1999 as a software company with the goal of making unstructured data as searchable as structured data. "A lot of the other e-discovery companies we looked at had good processes and people, but dropped off a cliff when it came to the actual technology they were using."

Clancy said the immediate goal is to get the Stratify business unit up and running, but "their technology over time will give our archive X-ray vision." Stratify's IP isn't limited to search, either -- Stratify also has its own proprietary methods for data deduplication, message-level single-instancing and internationalization, the process of searching using statistical analysis, rather than linguistic analysis when multiple languages. "You and I could be talking in Kanji, and someone else would still be able to tell just from statistical patterns that we were speaking about a particular transaction or topic," Clancy said.

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