Cooperation, Competition, Convergence

While the document destruction industry can appear fairly straightforward at first glance, a number of factors complicate the picture. As clients look for integrated approaches to their records management that incorporate document and electronic media storage as well as destruction, many document destruction firms are asking themselves how they can best meet their customers’ needs without taking on more than they can comfortably and competently handle.

This self examination has led some companies to seek cooperative arrangements with other companies in the information storage or destruction fields, while other document destruction firms have decided to expand their own service offerings. Regardless of the approach they select, the competition is often stiff.

Secure Destruction Business conducted an informal poll on our Web site asking readers about the services they offer, their customer base, their referral arrangements or alliances and the segments of their businesses where they are likely to make their largest capital investments. We followed up with some of the respondents who agreed to share their stories.

We’ve all heard about the "paperless office," which sometimes seems more like a far-fetched dream than a reality; but, in truth, more and more information is being committed to hard drives, CDs, DVDs and PDAs. This makes electronic media destruction of growing importance, and document destruction professionals are sometimes asked by their customers to handle such tasks.

Code Shred Ltd., based in Island Park, N.Y., serves customers in New York, New Jersey and Connecticut with mobile and plant-based shredding services. The company has about 1,500 bins and 1,000 consoles out for service in the tri-state area. Code Shred Vice President Sean Fredericks says the company considers product and media destruction jobs on a case-by-case basis, though its equipment is a limiting factor. However, Code Shred has destroyed film and CDs and has found a recycler to handle those materials, Fredericks says.

San Francisco-based Shredding and Destruction Services, a Norcal company, also destroys CDs, data tapes and hard drives, according to the company’s Margaret Callaway, though she adds that the plant-based company is not really equipped to provide such services on a regular basis.

While this is currently the case, she adds that the company’s tentative next step is to get involved with electronic media destruction and recycling by installing a dedicated processing line.

Auburn, Mich.-based Absolute Shreds, which was established in 1997, offers mobile destruction services to most of Michigan. President Kathy Cornell says the company operates four shred trucks and services customers primarily in the medical and financial services sectors.

When it comes to electronic media destruction, Cornell says Absolute Shreds offers the service, using one of its shred trucks to process the material. On occasion, if the designated truck is not available to provide the service at the time of the customer’s request, Absolute Shreds will bring the material back to its shop, where it will use the designated truck once it is available to destroy the electronic media.

"We’ve seen the growth of electronic media destruction," Cornell says. "More customers are asking for the service," she adds, which is why the company is looking to add dedicated plant-based equipment. "I think it is going to be an area of strong growth."

Absolute Shreds has been searching the used equipment market for a suitable piece of equipment, she says.

"I’d like to be able to take care of my customers," Cornell says. "I have to step up to give my customers the types of services they are looking for."

She says that Absolute Shreds prices document destruction and electronic media destruction differently. "Right now, you do have to price electronic destruction higher," she says. "There are extra handling fees and higher costs involved. It takes more of a toll on the equipment."

To help lessen that toll, Absolute Shreds waits until it’s nearly ready to replace the blades on its shredding truck before destroying electronic media.

Dave Van Kerrebroeck of Mr. Shredder, Mississauga, Ontario, Canada, runs a fleet of 13 mobile shred trucks in Ontario between Windsor and Montreal. The company also runs a plant-based shredder, which it uses to destroy electronic media.

Mr. Shredder has been shredding electronic media in-house for nearly two years. "The electronic media destruction really is something that blends in nicely with the destruction services," Van Kerrebroeck says.

The company sends its shredded electronic media to a firm that reclaims the material, separating the metal from the plastic.

The same sales force that sells Mr. Shredder’s document destruction services also handles the electronic media destruction requests. "The same person deals with it. It’s part of the same conversation. It is integrated into the document shredding program," Van Kerrebroeck says.

Electronic media not only needs to be destroyed, it also needs to be stored, and at least one of the companies that responded to SDB’s informal poll has plans to expand into that sector.

"People are moving away from paper slowly," Scott Fasken of Colorado Document Security, Palisade, Colo., says. "But they still will have electronic ones and zeros, and they have to put those in a safe place." Fasken says his company, which provides mobile destruction services to western Colorado, northern New Mexico and Utah, is interested in safeguarding this information.

Fasken says getting the financing for such a venture is not the problem. "We have bankers approach us interested in offering financing. They understand this industry and its growth potential," he says. "It fits for them."

Instead, he says, it’s a people issue. "The right organization and the right team of people to make it work is what are holding us back."

Colorado Document Security’s Fasken says record storage and document destruction go hand-in-hand. If a company is able to offer both services, he says, it helps in securing customers.

While Fasken says he’d eventually like to offer storage services, he stresses that it takes time to get everything organized. "You want to be able to take care of what you’ve got."

Growing too large too soon could impair future growth, Fasken says. "Too many businesses never take the time to look at where they are growing. Sometimes bigger is not best. It could bite you from a customer service standpoint."

Van Kerrebroeck made the foray from document destruction to document storage about three years ago. He offers these services under the name Lighthouse Record Management.

"We always said we wouldn’t get into the storage business, but as we saw more of our colleagues getting into it, we thought we should look at it." Lighthouse Record Management functions as an autonomous operation with dedicated employees, he says.

Van Kerrebroeck says selling records storage varies from selling destruction services in that it is more of a "planning trail, not a product sale," that uses a targeted approach and has a longer cycle. "Selling the records storage requires a different set of plans and a level of detail that is really quite impressive." He adds, "A shredding sale is going to happen immediately or it’s not going to happen."

If perspective storage customers have dedicated records management staff, the sales cycle could be as long as two years, Van Kerrebroeck says.

Van Kerrebroeck says that small clients in particular have been interested in Lighthouse Record Management’s services, adding that many of the national record management companies "don’t like small companies."

Van Kerrebroeck says the client and the destruction firm can benefit by bundling destruction and storage services. "Clients should benefit from giving you more than one line of business," he says. "If you sell them more than two lines, your chance of losing them is almost nil."

Donald K. Foltz, chief privacy officer, Private Information & Document Destruction Services for Yuma LLC, Yuma, Ariz., says his company actually considered record storage before launching its secure shredding service, which provides on- and off-site destruction services. "Going into record storage just seemed like a natural progression," he says. Foltz says adding record storage and digital archiving has helped to add customers to the company’s document destruction business. "Our customers want one source for all of their services."

While Code Shred’s Fredericks is interested in expanding into record storage, he also has concerns. "I think it would help out business, but it’s a potential distraction from our main focus of shredding," he says. "It’s hard to completely determine that."

Sometimes, document destruction firms use alliances and agreements to offer their clients an expanded range of services.

Foltz says his company uses written agreements with all of its subcontractors, among which are a film recycler and an electronics recycler. "We pursued these relationships as additional revenue streams and to provide value-added services for our customers."

Fredericks says Code Shred has referral arrangements with commercial moving companies. "Some pass work onto us, others ask for a commission off of the referral," he says. All such services are billed under Code Shred’s name, however. "That’s the important part," he says, adding that Code Shred has the necessary insurance coverage. "Some have been really good for us and have led to some very large jobs."

For some shredding companies, the alliance opportunities are not solely with related companies, but with other shredding firms.

According to Fredericks, Code Shred is "looking to grow as fast as we can while staying as organized as we can. We are looking at the possibilities of taking on other companies that are looking to combine services."

In these arrangements, Fredericks would be looking for the partner company to use Code Shred’s name. The arrangement would be similar to a franchise, but without the franchise fees, he says, and would help Code Shred to land national contracts.

"The document destruction industry is definitely in the growth mode," Fredericks says. "A lot of companies are trying to consolidate the industry. A lot of people will hang on without that happening. You’ll see the small and mid-size companies working together." n