When you're a small business and you can't afford to lose those accounting statements, graphic design illustrations or medical records, keeping all your files in one location isn't the best option. Storage industry insiders say keeping your information on external hard drives and CDs are important, but if your office or home burns down, your data can be lost.

With extra backup becoming critical for businesses, it's no wonder that online backup services have emerged as a major industry. Today, a slew of vendors compete for the attention of small to midsize businesses looking to the Internet to safeguard their data.

But with everyone getting into the action -- from Internet startups to major banks like Wells Fargo, which announced its VSafe storage service earlier this year -- how should a small business select its backup service?

One place to start is by considering vendors that store backups in an offsite location as well as to make sure even those backups are secured in a second spot.

Vance Checketts, COO of EMC's (NYSE: EMC) Mozy, a leading online backup site, cited the horror of backup tapes from the University of Utah Medical Center being stolen from an offsite facility. If the facility had used an online backup service, he explained, the health records for 2.2 million patients would not have been lost. (They were recovered later, however.)

Choosing a service that backs up the data to a separate location "will cost the service provider more and cost you more, but you have to decide for yourself how much risk exposure you want to take," Adam Couture, an analyst at research firm Gartner (NYSE: IT), told InternetNews.com.

Set and forget

According to David Friend, CEO of online backup provider Carbonite, the service must be "dead simple" and automatic. "When you're out in the field and sitting in a Starbucks, your backup should be working," he said.

Experts stressed picking a leading provider that's trustworthy and has been in the business for a while. "You want to find someone that is a big, well-financed business, because when you need your backup, you want your vendor to be there," Friend explained to InternetNews.com.

Likewise, Daniel Stevenson, director of channel marketing at Iron Mountain Digital, suggested buyers ask, "Is this a fly-by-night operation or a vendor that truly understands what it means to protect customer information?"

It's important to think about the reputation of the provider you choose, especially for small businesses such as doctors' offices, writers and consultants. In those sorts of businesses, consumers rely on the information produced by the business.

"We are producers of what other people consume," said Joseph Martins, managing director of the research firm Data Mobility Group.

Insiders suggested trying out the services before committing to a plan. "Make sure you do some test restores and can get the data back if you need to," suggested Sam Gutmann, CEO of backup service Intronis Technologies.

EMC's MozyPro service for SMBs. Click to enlarge. Source: Mozy

Also important is making certain that a solution can address all of your business's systems. Mozy's Checketts, for instance, said his service offers an online dashboard that allows users to control the backup settings for all computers in their company.

Likewise, Gartner's Couture pointed out that an ideal service should support multiple operating systems. Some do not support Mac, for instance.

Security and capacity

Experts such as Mozy's Checketts and Sam Gutmann, CEO of backup service Intronis, also stressed the importance of encrypting data before it leaves your machine -- and ensuring it stays safe throughout its trip to the datacenter. In particular, they recommended using a method such as Advanced Encryption Standard, or AES (define).

According to Iron Mountain's Stevenson, "Security tends to come up very early in the conversation." Vendors ask Iron Mountain, "Where's my data being taken? Is it encrypted when it leaves your office or when it gets to the storage location? Who's storing the information?"

Page 2: Capacity, retention and getting your money's worth

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