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Export Regulations Security Shredding Year End Wrap

By Ken McEntee
Vendors serving the security shredding business reported strong business in 2016 with expectations for the trend to continue in 2017.

Guy Wakutz, sales manager at Alpine Shredders Ltd., Kitchener, Ont., said his company sold more shredder trucks in 2016 than ever before and, as of mid-December had new orders backlogged 10 weeks out – carrying deliveries into March.

“From the perspective of a shred truck manufacturer, it’s been an outstanding year for the shredding business,” Wakutz said. “We’re confident that business will remain strong in 2017. When we talk to our customers we hear a lot of optimism. Everybody is reporting strong business.”

Terry Lee, business development manager for Trans Lease Inc., of Denver, which leases and finances shredder trucks and other specialty vehicles, said 2016 brought an increase in shredding companies expanding their fleets and replacing older vehicles.

“In a recessionary time, businesses tend to hold off on replacing their trucks,” Lee said. “When business comes back, all of a sudden you have an explosion in demand, and we’re seeing some of that exploding demand right now. It’s a very good sign and we’re confident that it is going to continue through the next year.”

Delmont, Pa.-based Allegheny Paper Shredders, which will celebrate it’s 50th anniversary in business in 2017, had one of its best sales years in the company’s history this year, said Evelyn Jefferson, Allegheny’s vice president of sales. Jefferson said the company’s strongest growth during the year was driven by the need to destroy hard drives and other digital data devices.

“Our core competency business for many years was paper shredding, and while we are still selling a lot of paper shredders, it is the digital world – the hard drives – that are driving our business growth today,” she said. “Every single device you have, whether it is your cell phone, your copy machine or your printer, has memory and there is so much information stored on those devices. And they are getting smaller and smaller. You need to be able to destroy that data, and we manufacture a variety of equipment that shreds solid state drives and hard drives down to two millimeters.”

Document destruction in demand

Although Jefferson said Allegheny’s growth has been driven by hard drive shredders, Wakutz and Lee said the document destruction business remains strong, with room left in the market for additional growth.

“What we’re seeing is that paper shredders and record storage companies are asking about adding hard drive shredders onto their shred trucks as an additional revenue source,” Wakutz said. “But the hard drive shredders account for only about 5 percent of our growth. The other 95 percent is still paper. You’re not going to find a lot of accounts that have 5,000 to 10,000 hard drives to shred. Typically they are going to have 40 or 50, and that’s only once or twice a year, so picking up accounts with a steady stream of hard drives to shred isn’t going to be easy to do. Paper, on the other hand, is an ongoing monthly service.”

Wakutz believes that the document destruction market has yet to be fully saturated.

“The market is maybe 7o percent covered and there is maybe 30 percent out there who still are not shredding their paper,” he said. “A lot of people we talk to are adding their third or fourth trucks to increase their routes. Some people are noticing that if they are willing to drive a little out of town it can be lucrative. Servicing rural areas takes away some of the challenges of working in the big city where you can’t find a place to park without getting a ticket. Rural routes might increase your profit margins compared to the big city where you get beaten down on price.”

Robert Johnson, CEO of the National Association for Information Destruction (NAID), said the number of companies involved in data destruction is decreasing, but the overall volume of business is growing.

“Ten years ago there were new companies starting up every day,” he said. “That isn’t the case any more, but the amount of paper being shredded continues to steadily grow. That’s a very healthy scenario. The number of vendors has plateaued because customers are better able to tell the good vendors from the bad vendors. The bad ones are going out of the market.”

Lee also reported increased interest in mobile document destruction companies adding hard drive shredders to their trucks.

“We’re seeing more interest in hard drives,” he said. “In some cases people are asking about trucks that can do both paper and hard drives, and others want to run separate trucks with the capability of destroying the hard drives on site. We’ve been financing more and more of the trucks with dual capability.”

Jefferson said paper documents will never go away, but there is likely to be less of them in the future.

“I will never see a paperless office in my lifetime, that’s for sure,” she said. “For a very long time there will still be plenty of paper to shred. But a lot of old archives have already been destroyed over the years while companies are increasing storing records digitally.”

Giants driving the market

Growth in sales in the data destruction business is being driven by large corporations and government offices, Jefferson said.

“Smaller companies tend to use destruction companies, where the larger companies are doing their shredding in house,” she said. “It is a pendulum that swings back and forth. In the 1980s every insurance company and hospital wanted to do their own shredding in-house. In 1990s, more of them started to use document destruction vendors with mobile trucks. Now its swinging back to where the big companies are bringing it back in-house, and they are buying their own shredders, not only for paper but for hard drives as well.”

Creating trust

Part of the reason for that may be a hesitance to turn sensitive data over to an outside vendor. Johnson said vendors who create trust and credibility among their customers will continue to be successful.

“This is a very good time for companies who are prepared to meet the increasing scrutiny of the marketplace,” Johnson said. “Customers are concerned both with data protection risks as well as the high profile that data and privacy protection is getting in the media. Ten years ago, if a box of records was found in your dumpster, nobody would have said anything. Today, it’s a headline in the newspaper because there is so much attention being paid to data theft. The public is outraged at any compromise of their privacy in today’s world. So companies are giving tighter and tighter scrutiny to the qualification of their service providers. For those companies that are prepared to meet that increasing data security scrutiny, 2017 is going to be another very good year.”

Although most new medical records are stored electronically, Johnson said 40 percent of all HIPPA security breach notifications stem from paper copies.

“Sometimes the breach is related to dumpster diving, but not always,” Johnson said. “It’s usually a case of lost or misplaced records.”

As the CEO of NAID, Johnson said most of the questions he gets from members concern ways that they can improve their service and value to their customers.

“In the first quarter of 2017, NAID is going to publish the first ever textbook on information disposition,” he said. “Many people don’t realize that you can graduate from a university with a degree in data security or a degree in data security or cyber security and never be taught anything about information disposition. People come out of college and they don’t know the difference between overwriting and degaussing a hard drive. They don’t know anything about HIPPA or writing a contract with a disposal company. This is a 400-page, university-quality textbook made to educate people about information disposition. In today’s world, the data destruction companies that are able to meet the scrutiny of customers are in a position to do very well.”

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