While the practice of reselling used tape was established to mitigate budget constraints, the costs associated with data breaches can far outweigh any savings. According to industry analysts and others who study the financial, security and reputation risks of data breaches, the cost to companies resulting from the failure to protect data is growing each year. In a 2006 report from the Ponemon Institute (2006 Annual Study: Cost of a Data Breach) the average cost to companies per lost customer record as a result of a data breach is $182. Multiply this by the thousands of individual records that may remain on improperly retired used data storage products, and the financial risk to these companies becomes apparent.

"Today's tape cartridges have storage capacities of 500 gigabytes or more. Even if 99.9 percent of data is erased from a tape, hundreds of megabytes of potentially sensitive data could remain on the tape. This could include thousands of customer names and social security numbers which in turn expose a company to millions of dollars in legal fees, credit monitoring costs and customer communications. It could also ruin a company's reputation, result in significant customer desertions and potentially expose it to regulatory penalties and costly lawsuits," Kulkarni added. "Companies that sell used tape aren't selling back just one tape cartridge; they're selling hundreds at a time and, as a result, are unknowingly gambling with their customers' security and their entire businesses. The modest financial benefits from selling used tape are not being weighed against this potentially catastrophic consequence."

According to the Privacy Rights Clearinghouse, as of early October 2008, more than 245 million personal records have been exposed as the result of data breaches in the last three years alone, and that number is on the rise. In addition, the Ponemon Institute study found that more than 90 percent of data breaches occur in digital form and the costs associated with data loss are rising into the billions of dollars each year.