Merrill Corporation, a provider of global business process outsourcing solutions, recently filed to go public. The excerpt below from the company's S-1 filing outlines the global business process outsourcing industry:
Global business process outsourcing is an increasingly complex, broad and evolving area encompassing a wide range of outsourcing functions, including customer service, document management, marketing, logistics, procurement, human resources and product engineering. In an August 2005 report, International Data Corporation estimated worldwide spending on business process outsourcing services totaled $382.5 billion in 2004. This report estimated that the total market for these services grew at rate of 10.8% in 2004 and will continue to grow over the next five years at a 10.9% compound annual growth rate, with worldwide spending increasing to $641.2 billion by 2009.
We currently focus on the complex information and document management and communication solutions areas of the global business process outsourcing market. The boundaries of this market are constantly changing, presenting new opportunities and challenges for service providers. The development and proliferation of the Internet combined with new software and digital print technologies have led to a transition from a historically fragmented industry, with separate direct mail, printing and fulfillment providers, toward an industry where companies provide a broad range of integrated document and information management services. In addition, technological advances have led to the creation of new products and services, such as online data rooms and digital on-demand customized printing, and have contributed to the convergence of information management and document service providers. We expect the increasing technological complexity of document and information management will drive continued growth opportunities for business process outsourcing solution providers.
In addition to the broad outsourcing trends described above, each of our four business segments has its own unique industry dynamics:
Legal Solutions. According to a study we commissioned, the market for litigation services in the U.S. is approximately $50 billion, based on 2004 revenues, of which outsourced litigation and legal document management services represent $8 billion. These studies show U.S. case volume has grown substantially over the past 25 years, growing from approximately 2.6 million cases in 1976 to 6.3 million cases in 2004. Additionally, trial complexity and average trial length have grown in recent years with larger cases typically involving more parties and in certain instances international considerations. This increase in complexity has resulted in more activity throughout the litigation cycle, including an increase in average depositions per case and pages per deposition. We believe the ability to analyze large amounts of information effectively and integrate multimedia evidence into trial strategy provides attorneys with a distinct advantage. Based on the study we commissioned, in the U.S., large law firms (defined as firms with over 150 attorneys nationwide) represent approximately 30% of civil case volume, but over half of legal services revenue. We believe these industry trends, coupled with a fragmented competitive landscape, make the legal market an outstanding opportunity for a sophisticated service provider. Marketing and Communication Solutions. The global marketing and communication market includes a number of specialized services for a variety of industries. Within this broad area, we target the financial services, real estate, corporate and professional services industries. Our experience is that demand in these industries is driven primarily by common customer needs, including protecting and growing brands, managing geographically dispersed sales or service organizations, tailoring messages to target customers and meeting regulatory and corporate requirements for communications. In addition, we find that demand is driven by industry-specific factors such as the growth in mutual fund assets in the financial services industry and the use of the Internet for property listings in the real estate industry. We believe each of these trends has led to an increase in demand for packaged direct marketing programs. Transaction and Compliance Services. We estimate the market for transaction-related and regulatory compliance services is in excess of $1.0 billion annually. The market for transaction and compliance services is primarily driven by regulatory disclosure requirements established by governing regulatory agencies as well as by the level of securities offerings, corporate restructurings and merger and acquisition activity. According to Thomson Financial Securities Data Company, LLC, the number of equity securities offerings in the U.S. increased 25% from 2001 to 2005. We have experienced increases in the number and length of compliance-related filings. In addition, Securities and Exchange Commission rulemaking has increased the disclosure requirements for filing companies. Digital disclosure technologies are becoming an increasingly important part of the transaction and compliance processes. For example, in fiscal 2006 the number of pages processed through our Merrill DataSite online data room was over 19.7 million pages. Comparing the fourth quarter of fiscal 2005 to the fourth quarter of fiscal 2006, we have seen a 153% increase in the number of pages processed. Our average number of pages processed per day in the fourth quarter of fiscal 2005 was 24,262 and in the fourth quarter of fiscal 2006 was 61,428. The number of active users has increased from 33,110 to 115,906 from June 1, 2005 to June 1, 2006.
Our four other communication businesses compete in the translation, captioning, election services and specialty printing industries. According to a third party report, the current worldwide translation and localization market was $8.8 billion, in 2005, with no single provider capturing more than 5% of the total. We focus on product documentation translations for clients primarily in the life sciences, information technology, automobile and manufacturing industries. We also provide language translations for clients in the legal and financial services industries. According to a study we commissioned, the domestic market for captioning services (including sub-titling) is just under $200 million. We believe the greatest growth in the captioning business will be in international markets. We also currently provide election services in California, where election laws require the distribution of voter guides to explain propositions and other information to voters during election periods. Finally, within the broad commercial print market, we provide services in the niche, high-quality, four-to-eight-color sheet-fed printing market.