An Economic Detour? eDiscovery Operational Metrics in the Winter of 2023

Editor’s Note: This is the seventeenth quarterly eDiscovery Business Confidence Survey from ComplexDiscovery that has included three optional questions regarding business operational metrics. Since the introduction of specific operational questions around Days Sales Outstanding (DSO), Monthly Recurring Revenue (MRR), and customer revenue distribution, more than 1,550 legal, information technology, and business professionals have responded with their thoughts. 57 respondents shared their opinions on at least one of these three questions as part of the most recent survey and the aggregate results of the answers to all sixteen quarterly surveys are shared in the following observations and charts.

Industry Report

The Kinetics of Three eDiscovery Business Metrics in the Winter of 2023

ComplexDiscovery

The eDiscovery Business Confidence Survey is a non-scientific quarterly survey designed to provide insight into the business confidence level of individuals working in the eDiscovery ecosystem. The survey consists of nine core multiple-choice questions focused on factors related to the creation, delivery, and consumption of eDiscovery products and services. Additionally, the survey includes the following three optional questions focused on the business operational metrics of days sales outstanding (DSO), monthly recurring revenue (MRR), and revenue distribution across customer bases.

• How would you characterize the trajectory of your organization’s Days Sales Outstanding (DSO) during the last quarter? DSO represents the average number of days it takes credit sales to be converted into cash, or when a company’s account receivables can be collected.
• How would you characterize the trajectory of your organization’s Monthly Recurring Revenue (MRR) during the last quarter? MRR is income that a company can reliably anticipate every 30 days. Revenue from one-time purchases billed at the time of purchase is not included in MRR.
• Which of the following statements best describes the distribution of your organization’s revenue across your customer base during the last quarter? Distribution is the reduction of revenue concentration across the customer base. The customer base is the group of customers who repeatedly purchase the products or services of a business.

Survey participants were presented with four potential answers to the optional business operational metric questions and asked to select one. The choices were as follows:

• Increasing
• Unfluctuating
• Decreasing
• Do Not Know

The aggregate results of the answers to the business operational metric questions are shared in the following observations and charted overviews. They provide an interesting vector view of the trajectories of these important measurements and the results may also be helpful to business and legal professionals as they consider the current conditions and trends in the business of data and legal discovery.

Key Observations in the Winter of 2023

General

• In the winter of 2023, 57 eDiscovery Business Confidence Survey participants chose to answer at least one of the optional business operational metric survey questions in the quarterly survey. This represents a solid number of participants, given the intentional limiting of survey email requests to balance against the ongoing proliferation of new industry surveys and higher volumes of industry-centric email communications.
• In the winter of 2023, 87.6% of eDiscovery Business Confidence Survey participants chose to answer at least one of the optional business operational metric questions in the quarterly survey. This is slightly less than the percentage of participants answering at least one of the optional business operational metric questions in the fall 2022 survey.
• In the winter 2023 survey, between 49.1% and 42.1% of the respondents (depending on the question) did not know whether DSO, MRR, or distribution of customer revenue-based measures were increasing, unfluctuating, or decreasing.

Days Sales Outstanding (Chart 1)

• Exactly 22.8% of survey respondents reported DSO as increasing in the winter of 2023. This is a very slight increase from 22.5% reporting DSO as increasing in the fall of 2022. This is also the fifth-highest percentage of respondents reporting DSO as increasing since the introduction of operational metric questions into the business confidence survey.
• There was a decrease (6.9%) in the winter 2023 percentage (24.6%) of respondents reporting DSO as unfluctuating when compared to fall 2022 reporting (31.5%). This percentage is below the seventeen survey average of 28.1% of respondents reporting DSO as unfluctuating.
• 3.5% of survey respondents reported DSO as decreasing in the winter of 2023. This is a decrease from reporting in the fall of 2022 when 7.9% of respondents noted decreasing DSO. This is also the lowest percentage of respondents reporting DSO as decreasing since the survey’s inception.

Monthly Recurring Revenue (Chart 2)

• There was a significant decrease (19.0%) in the winter 2023 percentage (15.8%) of respondents reporting increasing MRR when compared to fall 2022 reporting (34.8%). This is also the second-lowest percentage of respondents reporting MRR as increasing since the survey’s inception.
• There was an increase (2.3%) in the winter 2023 percentage (28.1%) of respondents reporting MRR as unfluctuating when compared to fall 2022 reporting (25.8%). This is the second-highest percentage of respondents reporting MRR as unfluctuating since the survey’s inception. 
• Exactly 12.3% of survey respondents reported Monthly Recurring Revenue (MRR) as decreasing in the winter of 2023. This is a strong increase from the 5.6% reporting MRR as decreasing in the fall of 2022. This is also the fourth-highest percentage of respondents reporting MRR as decreasing since the survey’s inception.

Distribution of Revenue Across Customer Base (Chart 3)

• The percentage of survey respondents reporting an increasing distribution of revenue across their customer base decreased markedly (9.2%) between the fall of 2022 (30.3%) and the winter of 2023 (21.1%). 
• There was an increase in the winter 2023 percentage (31.6%) of respondents reporting the distribution of revenue across their customer base as unfluctuating compared to fall 2022 reporting (28.1%).
• There was a slight increase (0.8%) in the percentage of survey respondents reporting a decrease in revenue distribution across their customer base, with 5.3% reporting a decreasing distribution of revenue in the winter of 2023. 

Survey Charts

(Charts Can Be Expanded for Detailed Viewing)

Chart 1: An Aggregate Overview of Days Sales Outstanding (DSO) Trajectory

Chart 2: An Aggregate Overview of Monthly Recurring Revenue (MRR) Trajectory

Chart 3: An Aggregate Overview of Distribution of Revenue Across Customer Base

Past Survey Results

• Winter 2023 Survey (22 January – 27 January 2023)
• Fall 2022 Survey (11 September – 22 September 2022)
• Summer 2022 Survey (10 June – 27 June 2022)
• Spring 2022 Survey (18 March – 23 March 2022)
• Winter 2022 Survey (6 January – 12 January 2022)
• Fall 2021 Survey (5 October – 12 October 2021)
• Summer 2021 Survey (22 June – 6 July 2021)
• Spring 2021 Survey (28 March – 11 April 2021)
• Winter 2021 Survey (3 January – 12 January 2021)
• Fall 2020 Survey (21 September – 1 October 2020)
• Summer 2020 Survey (26 June – 10 July 2020)
• Spring 2020 Survey (2 April – 15 April 2020)
• Winter 2020 Survey (28 December 2019 – 11 January 2020)
• Fall 2019 Survey (29 September – 17 October 2019)
• Summer 2019 Survey (1 July – 17 July 2019)
• Spring 2019 Survey (1 April – 18 April 2019)
• Winter 2019 Survey (27 December 2018 – January 10, 2019)
• Fall 2018 Survey (14 October – 26 October 2018)
• Summer 2018 Survey (4 July – 24 July 2018)
• Spring 2018 Survey (7 April – 20 April 2018)
• Winter 2018 Survey (24 December 17 – 15 January 2018)
• Fall 2017 Survey (5 October – 17 October 2017)
• Summer 2017 Survey (6 July – 31 July 2017)
• Spring 2017 Survey (14 April – 1 May 2017)
• Winter 2017 Survey (20 January – 6 February 2017)
• Fall 2016 Survey (11 October – 1 December 2016)
• Summer 2016 Survey (1 August – 31 August 2016)
• Spring 2016 Survey (1 May – 31 May 2016)
• Winter 2016 Survey (15 February – 29 February 2016)

Additional Reading

• An eDiscovery Market Size Mashup: 2022-2027 Worldwide Software and Services Overview
• An Abridged Look at the Business of eDiscovery: Mergers, Acquisitions, and Investments

Source: ComplexDiscovery