Snips from William Creamer and replies:

> You lost me…again...why would information governance demand that we negotiate better storage contracts?

In my mind, Information Governance implies that the records manager has complete control of the records, ( managing, storing, distributing and sharing, and eventually disposing of information) although not necessarily all of the information.   He or she governs their behavior.  

The contracts that the vendor provides often usurp some of that control and in my mind create a breach of trust.  These contracts  take away the records manager’s ability to move to a new vendor, if there are issues of quality and service.

In certain crisis, these vendors include in their contract a clause that limits the volume of records you can remove in a day or a week or a month. As the records manager this could be problematic if you are in litigation and the records in storage are part of the Discovery process.  Any contract that  effectively removes total control of the records from the records manager or legal department is impacting the governance of the records.(In the past SLA’s allowed for breach of contract for failure to perform. )  Granted the Facilities Department or Purchasing may be the entity signing the contract that established the negative terms but they nevertheless impact the ability of the records manager or Legal in governing the records.

Now these same vendors jack up the shredding costs so that clients cannot use shredding as a means to egress their contract.  They may charge the client $16.00 for the Permanent Removal Fee and then some other large amount to shred the documents. In the Northeast fees for shredding have gone up to $12.00 to $16.00 per box on top of the hostage fee. 

The vendor is influencing your governance of the records collection by imposing punitive fees for removing or shredding records permanently from the collection.  The vendor is now controlling or governing the records.  For example, in a bad quarter, the business may decide to leave records in storage as it is cheaper than shredding the records and incurring a $32.00 per box charge.  The records manager may rightfully recommend they stick to the retention schedule so these records are disposed of properly and on schedule. Deviating from the records schedule may negate the imperative of accurately following the schedule rather than allowing outside vendors influence a proper decision.

>  Where you inherit an existing contract that was negotiated in the early 1990’s or before, where every major and most minor storage players had a hefty perm out fee.  

Many of the smaller vendors are being wiped from the face of the earth by the merger and acquisition trends; as they can no longer financially afford to take over records as the Hostage Fees are so punitive. This coupled with a shorter records retention schedule:  Average shelf life was 16 years in 1990.  Today that life span is 7 years on average and declining to 3 years on average by 2020.  So there is simply not enough life in the boxes to warrant buying out the boxes.

> That wasn't considered a critical issue then, because the number of boxes in storage ALWAYS increased, NEVER decreased.  Now you come on the scene as a new manager in 2000 or after, and you have a retention plan.  You can’t move to another vendor because your boss does not want to incur the perm out fees, or worse, shift them to another vendor, who will add their own fee.  

Exactly; this opportunity to move to a new vendor is fading, unless you agree to hold the records in storage for a longer lifespan.  So the vendor has once again impacted the lifecycle and governance of the records.  

The smaller vendors originally did not have a Hostage Fee but then they were threatened with “Sell out to us or we will offer your clients storage terms of 50% of your current rates and once we win the account, no matter how bad our service, our Permanent Removal Fee will stop them from ever escaping.”  So the little guys had to add the Hostage Fee to their contracts to even stay in business. Or sell out!  It was the predatory pricing that forced them to add the fees or be run out of business.

> You have very little leverage to negotiate the perm out fees away.  Essentially, you are in a weak position.  I’ve personally worked my way around some hefty legacy perm out fees, but I'll be honest, that was as much my willingness to bluff and an opportunity, as it was sales skill.

The sharing of these tactics would be a worthwhile exchange of knowledge. Since we are adding new records managers each year, they could benefit from this experience.

> So you've been talking about these issues for decades, and the problems still persist? How do you account for that?

There are several factors in play.  ARMA is more concerned with attracting vendors to their conference to support their trade group employees than they are in helping advance the cause of records managers. And this leaves records managers to fight this battle one at a time.  If a group of records managers were to align their companies in a Class Action lawsuit alleging restraint of trade, extortion,  and potentially Racketeering; as hostage fees are strong arm tactics! They are similar in nature to “the mob” coming into your business and threatening your business with harm unless they are paid a fee that has no merit other than avoiding a threatened action. Here the threatened action is to lock down your records and refuse to deliver them back to you. 

This Class Action may happen soon; as some class action law firm(s) are looking at the billions of dollars being charged and see this as a huge settlement that they will win a large percentage of.  This might be a quick suit and settlement and removal fees will return to the actual costs of removing the box, placing it on a pallet and shrink wrapping it and deleting it from a data base.  

But the ERMS industry is reacting to this in another way: IBM, Google, Microsoft and other Cloud vendors see this Hostage Fee as a selling tool to convince corporations to move away from paper records.  So ERMS is on the rise.  Internal Server Clouds, local proprietary Cloud service providers and Co-Location companies are all moving to the Cloud model because they can help rid the industry of companies who use strong arm tactics to impede the flow of information and records.

This is, in turn, shrinking the volume of box records required,  and with smaller volumes of records they can now be stored on site at the client’s site for their “Vital Records”.  A strategic movement of bringing records back in house, that must be kept long term due to their classification; and, then storing the rest in the Cloud where the client still maintains the governing control.  Smart records managers are adapting.

You are an example of that.  You used your insight and experience to resolve the issue of Hostage Fees.  These discussions we have may guide others to follow your action. 

One other trend that is occurring, firms stop sending records to the current vendor with the hostage fee.  They then let nature take its course and eventually they shred their way out of the harmful vendor.  (Unless they have a high-water mark in their contract.  Please people tell Mr. Creamer and myself, you did not let them add that??)  In the absence of a high-water contract, records can diminish to zero and you are out. If you have a “High-Water Mark Contract” then your records volume could diminish to zero boxes but if your high water amount was 2,000 boxes, then you must pay the 2,000 box storage fee forever.

You suggest that even though we discuss this issue again and again, that no positive benefit exists. That would be incorrect. The reason that the merger and acquisition frenzy is occurring now is that boxes are disappearing from the most punitive vendors at accelerating rates.  Shorter retention schedules, Cloud Storage, movement to in-house storage for vital records and even RAID 5 or 6 and mirroring are impacting the volume of paper being printed as stored record copies. The volume of boxes on shelves previously grew organically and geometrically.  Now they must spur growth with acquisitions to continue their growth.  This means that year after year clever records managers are gaining more control by working with IT, the Datamap and legal to build a better mousetrap.

In a capitalistic society, corporations will always seek the most efficient method to perform a task and Hostage Fees tipped the scale to move to Cloud Storage. But tape storage is also growing faster than ever.  Tape storage is the most cost efficient and by far the most accurate way (Bit Error Rate advantages - BER ) to store records. And the result is boxes are just evaporating off the shelves.  The most clever offsite storage companies are rapidly expanding the Media Storage portion of their business and the records manager and the IT Manager work together to make sure that Hostage Fees do not show up on the contract.

> I’m finding it hard to believe that such an erudite fellow as yourself, gifted in the entertainment arts, philosophy, and language, has never heard of the title, "Records & Conflicts Manager".  

And truthfully, I did not know that records managers were ‘the entity' guiding the law firm through the process of avoiding Conflicts of Interest. I did not realize until you replied that you were with a law firm and then the term Conflict Manager made sense. Mr. Smallwood’s description also made it clear.  

I believe there was a discussion where a potential lawsuit about hostage fees was thwarted because the large storage vendor bought the law firm the client was intending to use; so they had to start over as the acquired law firm made the claim of conflict of interest. (How afraid of a lawsuit must a storage firm be to take this drastic maneuver?) 

So these discussions do have merit. You provide thoughtful inquiries that always make me think about these issues.  I will bet that many records managers gain from these discussions. 

And I will try to limit my use of Yiddish humor without definition. I have to quit now as I am getting all verklempt! 

Verklempt:(adj) Definition: overcome with emotion; clenched. Made popular on Saturday Night Live by Martin Short, Bett Midler and others. 

I hope you take these little jokes with the good humor I intend.  I truly enjoy the repartee. But I will move along as I have beat the governance issue to death. Have a great day.

Hugh Smith
FIRELOCK Fireproof Modular Vaults
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(610)  756-4440    Fax (610)  756-4134
WWW.FIRELOCK.COM



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