Information Destroyers

By Baselinemag  |  Posted 2004-12-01 Print this article Print

"Information destruction" companies—outfits that shred documents and disks—have seen demand for their services grow into a $1.5 billion service for government and private industry.

The Data Undertakers
There's one sure-fire way to keep information from prying eyes: Blast it into oblivion. When words and numbers outlive their usefulness to a business—or if they exist in unused, redundant copies—the safest thing to do is to kill 'em.

For information stored on a hard disk, a disk-scrubbing program can overwrite the data with zeros to obliterate it. But if it's on paper, the documents are likely to be chopped into tiny, confetti-size bits and carted away to a recycling plant. And these days, the business of destroying private records is booming.

In the U.S., the shredding industry has grown threefold in the past five years to roughly $1.5 billion in sales for 2004, according to estimates from the Orwellian-sounding National Association for Information Destruction (NAID), a trade group in Phoenix.

What's driving demand for "information destruction" services are fears that the theft of valuable data, whether intellectual property or customer information, will inflict serious financial damage on a corporation. "Information can be a huge liability in the hands of the wrong people," says Al Trujillo, president and chief executive officer of Recall, one of the world's biggest document-shredding companies.

Traditionally, businesses shredded documents to thwart corporate espionage: You wanted to prevent competitors from finding trade secrets in the trash. That's still a factor, but identity theft has become the top reason to shred, according to industry executives. Government regulators are now pushing companies to step up their document-destruction practices. Next year the Federal Trade Commission, under the Fair and Accurate Credit Transactions Act of 2003, is expected to require companies to dispose of consumer information so it "cannot practicably be read or reconstructed."

For health-care providers, the Health Insurance Portability and Accountability Act mandates procedures for ensuring the privacy of patient records and threatens fines of up to $25,000 per year if such information is improperly disclosed.

"Now that the laws have teeth, we need to be absolutely sure that patient information is disposed of correctly," says Philip W. Guarneschelli, chief operating officer of PinnacleHealth System in Harrisburg, Pa. "It's like handling medical waste." Once a week, Infoguard, a records management firm in Lansdale, Pa., empties 400 bins located at the company's four hospitals and hauls the paper to one of its plants for shredding.

Most companies, though, don't like discussing their document-disposal activities, and a general air of secrecy pervades the industry. "We don't ask a lot of questions," says John Bauknight IV, president of Shred First, a 90-employee firm in Spartanburg, S.C. "If it's not environmentally hazardous and it's not breathing, we'll destroy it."

Three years ago, Bauknight's company destroyed 1.5 million unsold Backstreet Boys CDs for a music distributor that didn't want to send them to a landfill and have them turn up on the gray market. Many shredding companies also routinely demolish computer hard drives and other electronic components (such as those from bank ATMs), police uniforms and other clothing, defective products and surplus inventory.

The business is geared around efficiency: How fast can you turn something valuable into useless garbage? Vlad Vasak, vice president of process and technology in Iron Mountain's shredding unit, says that in one hour, its most powerful machinery can shred 15 tons of paper into 2 x 5/8 -inch strips, a standard intended to ensure that a document is impossible to piece back together. Mobile shredding trucks for destroying documents on-site at a customer premises can process 3,000 pounds per hour.

But while shredding is on the rise, there's still a faint smell of white-collar crime about it. "People associate shredding with Enron and all this shady activity, but in truth every company needs to be shredding," says Steve Hastert, head of operations at shredding provider DataGuard USA.

To burnish the industry's image, NAID has promoted a certification program that sets minimum standards for document-destruction firms. NAID-certified companies, for example, must have employees wear identifiable uniforms as well as undergo drug testing and background checks.

Recall's Trujillo says such standards are vital to winning the trust of customers. "The main value we provide is consistently maintaining security around the documents," he says. "Unless we enforce a set of standards, this industry is going to get a bad name."

Major Shredding Services
Iron Mountain
URL: www.ironmountain.com
Headquarters: Boston, MA
Phone: (617) 535-4766
Ticker: IRM (NYSE)
Employees: 13,000
Revenue, shredding services: $80 million to $100 million, 2004
History: The 53-year-old document storage and retrieval company has expanded its shredding services from serving five North American markets in 1999 to 82 in 2004.

URL: www.recall.com
Headquarters: Norcross, GA
Phone: (770) 776-1200
Ticker: Subsidiary of Brambles, an Australian business services company
Employees: 4,000
Revenue, shredding services: $114 million, 2003
History: The company, whose core business is records management services, entered the North American market in 2000.

Shred-It International
URL: www.shred-it.com
Headquarters: Oakville, Ontario, Canada
Phone: (905) 829-2794
Ticker: Privately held
Employees: 2,200
Revenue: Not disclosed
History: Founded in 1988, it is the largest firm focused exclusively on shredding services. It operates 700 mobile shredding trucks and 130 document-destruction facilities worldwide and claims to have 130,000 customers.

Source: University of California at Berkeley, "How Much Information?" 2003

The executives listed here are all SAP customers. Their willingness to talk has been confirmed by Baseline.


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