What Is MFT (Managed File Transfer)? Definition, Working, and Best Practices for 2022

Managed file transfer (MFT) enables secure file transfers for enterprise use cases through a combination of secure communication protocols, file transfer automation, integration, and managed services like reporting and logging, all bundled into a comprehensive software solution. This article explains the functioning of MFT and eight best practices for using MFT technology in 2022. 

What Is MFT (Managed File Transfer)?

Managed file transfer (MFT) enables secure file transfers for enterprise use cases through a combination of secure communication protocols, file transfer automation, integration, and managed services like reporting and logging, all bundled into a comprehensive software solution. 

Using MFT, enterprises can address all file transfer requirements with a single tool. IT administrators do not have to manually configure network protocols, set up security parameters, or manage automation scripts. MFT makes all of these features available as part of an easy-to-implement software to streamline file transfers in an enterprise.

MFT technology can be of one of two types:

• On-premise MFT: Enterprises can install MFT solutions as desktop software. In such cases, the integrations are manually configured, and there is no interaction with the cloud. On-premise MFT is secure but requires more effort.
• MFT as a service or MFTaaS: MFTaaS applies software as a service (SaaS) principles to managed file transfer. The technology is available as a cloud-based solution installed on any desktop or is accessed from the browser. Most leading MFT vendors today offer MFTaaS. 

Managed file transfer technology is a mature market, with the first Gartner Magic Quadrant for MFT launched in 2009. Despite this, it continues to witness steady growth due to increased enterprise demand. 

Enterprises now rely on connected applications more than ever before, which means that data must securely travel between workflows and apps. MFT enables secure and automated file transfer to power a connected enterprise and safeguards information exchange between different B2B and B2C stakeholders. Consequently, the global MFT market is expected to grow from $939 million in 2020 to over $1.7 billion in 2026, as per a 2022 report by Mordor Intelligence. 

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Managed file transfer features

The key traits of MFT include:

• The use of secure communication protocols: MFT was initially introduced as an alternative to file transfer protocol (FTP). FTP enables fast, simple, and convenient file transfers at a meager cost, but lacks security mechanisms. In contrast, MFT uses secure protocols like hypertext transfer protocol secure (HTTPS), Secure Shell Protocol or SSH FTP (SFTP), and file transfer protocol secure (FTPS).
• Managed services for further value-add: Managed services are a crucial element of MFT as it eliminates a lot of the manual effort involved in file transfers. First, the MFT vendor performs the core task of selecting, configuring, and managing network protocols. Second, the vendor also provides transfer monitoring, real-time statistics, user permission control, storage management, etc. 
• Event-driven automation with fully managed scripts: MFT enables file transfer automation in response to specific events. For instance, if an employee working in the supply chain department alters an invoice, it could be automatically synchronized with a central data lake using MFT data transfers. Automation also helps enforce data retention policies. 
• File sharing (in addition to transfer) capabilities: File transfers enable the secure transmission of data from one system to another, whereas file sharing places data in the hands of an individual. MFT is useful for file sharing use cases as it enforces user privileges, password-based protection, cryptography-based encryption, and other security measures. 
• Integration with IT systems: Enterprises can integrate MFT with related systems like data warehouses and business intelligence. It also connects with incoming data sources like invoicing portals and human resource information systems. It thus acts as a consolidated route for data exchange in an enterprise. 
• Easy scalability of servers: FTP servers are difficult to scale and cannot accommodate high volume file transfers between multiple, complex systems. MFT addresses this by automatically calibrating file transfers mechanisms based on volume. It can also utilize cloud resources to provide high-availability file transfers. 
• Compliance with regulatory requirements: Since MFT technology is used for sensitive data exchange, vendors pay special attention to data privacy and compliance. They comply with a variety of regulatory requirements as per Sarbanes Oxley (SOX), Payment Card Industry (PCI), International Organization for Standardization (ISO), and other entities. 

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How Does MFT Work?

The functioning of managed file transfer comprises five steps – upload, encryption, arrival, logging, and automation. Let us discuss each of these steps in more detail: 

1. User or IT administrator uploads the file to an MFT program

Managed file transfers take place in two scenarios. It helps send confidential documents and information to an external location, such as a client or a regulatory body. Alternatively, it moves information around within an enterprise by securely traversing different systems and environments. A user must first upload the file to an MFT program in both cases. 

External file transfers typically happen via an MFT-enabled email client. The user’s email application has an MFT plugin so that any attachment is sent via the managed file transfer protocol rather than public routes. Internal file transfers rely on an MFT program installed on an endpoint device (desktop or smartphone). The person initiating the transfer uploads the file to the MFT program completes an identity verification process if needed, and triggers the next step. 

2. MFT solution encrypts the file and prepares it for transfer

Once the file is available to the MFT solution (as an email attachment, a direct upload, or inside an MFT-monitored desktop folder), it will encrypt the file as per the latest cryptographic standards. 

Federal Information Processing Standard (FIPS) 140-2 is the most common encryption standard applied to managed file transfers. It validates the cryptographic modules to meet security standards mandated for public sector companies. MFT technologies use various kinds of Advanced Encryption Standard (AES) cryptographic techniques to comply with FIPS 140-2 levels of encryption security. In some cases, it may use the OpenPGP format to secure the information, mainly if it is an email message. 

Once the file is encrypted, MFT will prepare it for transmission via a secure protocol like HTTPS, SFTP, or FTPS. The files can be sent as is or may be converted into enterprise-ready formats like Excel, XML, and JSON to store in a data warehouse. 

3. File arrives at the recipient endpoint and is decrypted

In the third step, the target destination receives the file that originated from the MFT server. 

By now, it has traveled across the initial source, the MFT server, and secure network pathways – but the file remains encrypted at every step to prevent bad actors from breaking in. In this encrypted form, it will arrive at the destination folder on a server or at a designated email address. The user can decrypt the file and access the information contained within it. An automated system with the correct credentials can also decrypt the file and leverage it for business processes, such as analytics. 

The system will record the arrival of the file at the target destination. The user who uploaded the file in the first place will receive a notification confirming that the recipient or the destination system now has access to the information conveyed. 

4. MFT solution maintains an audit trail of all transfers

Managed file transfers track the information sharing process from the beginning to the end. It maintains a record of when the transfer was initiated and the credentials used. It follows the transmission pathway and notifies all involved stakeholders of the file’s arrival. The user also receives an alert when the file is decrypted at arrival. 

MFT enables two kinds of data logging: real-time and historical. It drives complete visibility in the file transfer process with real-time alerts and statistics via a centralized dashboard. Further, It also maintains historical records for audit trails. IT managers can generate monthly, quarterly, or annual reports on data sharing activity to demonstrate compliance with internal and regulatory policies. 

5. User sets up MFT automation to integrate enterprise applications

A primary reason to adopt MFT is to drive file transfer automation. Legacy processes involve a lot of manual effort to set up the transfer, encrypt files, transfer files in bulk, etc. Using automation, enterprises can effortlessly configure the movement of information between different systems, users, and external stakeholders. 

Users may create the automation schema in-house and implement it by the MFT vendor. Or, they may make use of vendor-provided MFT automation scripts. Some of the critical processes that can be automated include: 

• Very large message (VLM) file transfers
• Recurring transfers 
• File encryption in batches 
• Scheduled file copying 
• Conditional automation – e.g., initiate transfer if data modifications are detected

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8 MFT Best Practices for 2022

Managed file transfers offer several benefits. They enable secure data exchange without the risk of data manipulation or data loss. When the data compliance burden is constantly growing, MFT also simplifies audits. To gain from these benefits, organizations should follow eight MFT best practices. 

1. Select your encryption methods carefully

It is easy to rely on the vendor-provided encryption mechanism without looking underneath the hood. However, MFT users should know which encryption method is being used to transform, secure, and relay their files across the enterprise and public networks. Typically, MFT solutions will offer the following encryption options: 

• AES 128-, 192-, or 256-bit encryption
• Rivest-Shamir-Adleman (RSA) encryption
• Triple Data Encryption Standard (DES) using a 56-bit key
• Twofish, a license-free encryption method with 64 or 128 bits

Select the encryption method according to your region and the type of data most frequently transferred. The U.S. public sector commonly adopts AES encryption, RSA is helpful for person-to-person transfers, triple DES protects against brute force attacks, and Twofish is useful for file and folder encryption during storage. 

2. Leverage MFT for person-to-person data transfer

The most common application of managed file transfers is for cross-platform integration and automated data flows. MFT allows operational teams to set up automated systems to fetch and archive information across disparate endpoints and file locations. You can configure MFT to monitor a specific folder, and whenever a file is dropped into the folder, it will be automatically transferred to a secure and centralized location. 

However, MFT for person-to-person data transfers is equally important. Let us say an organization automatically sends its suppliers an invoice received at the end of every month. This is managed via MFT software integrated with the supply chain management system. If there is an error in an invoice and a supplier reaches out to the support team, they may send the missing information via email. This will expose Email communication to online threats and bad actors without MFT for person-to-person data transfers. That’s why this best practice is so important. 

3. Screen MFT vendors for compliance adherence 

The primary purpose of MFT adoption is to strengthen security and drive compliance. Many organizations are replacing their simpler and often cheaper FTP systems with managed file transfers. When selecting a vendor, one should not take compliance adherence for granted. Most MFT solutions will comply with broad data privacy standards like the ones laid down by the General Data Protection Regulation (GDPR). However, industry and region-specific compliance require special attention. This includes compliance with: 

• The California Consumer Privacy Act (CCPA) in the U.S.
• The Payment Card Industry Data Security Standard (PCI DSS) for teams and organizations dealing with customer payment information, such as contact centers 
• The Health Insurance Portability and Accountability Act (HIPAA), when working with medical data
• The Health Information Technology for Economic and Clinical Health (HITECH) Act for pharmaceutical companies 

4. Avoid choosing FTP over MFT to save costs

FTP is among the most affordable file transfer solutions available to enterprises today. Users can take their pick from multiple free and low-cost FTP clients, and they can set up an FTP server on virtually any computing system. However, FTP is a simple protocol that operates via plaintext. This means that user ID information, password, credentials, and the data contained within files travel through the network in an unencrypted form, open to anyone who breaks into the network. FTP even supports anonymous users, removing the need for credentials altogether. 

That’s why enterprises should avoid using FTP, regardless of its cost advantages. Managed file transfers are a more intelligent alternative as they enable end-to-end encryption, compliance, and visibility. Over time, its automation and integration capabilities will make file transfer processes more efficient and worth the cost. Due to efficiency gains and the non-compliance penalties avoided, MFT helps lower the enterprise’s total cost of ownership in the long term. 

5. Improve the MFT user experience to drive adoption

Like any security-focused system, the success of MFT hinges on widespread adoption. If the managed file transfer solution experience is too complex, users will try and find a workaround. Remember that the user’s first instinct will be to send the information in the simplest way possible – e.g., via email or through online messaging clients. If these are blocked, they can turn to peer-to-peer file sharing sites that are not exposed to security risks. 

The only way to guarantee adoption is to improve the MFT user experience. Integrate the technology into existing files and folders so that users can drag and drop the relevant file into a designated desktop location. Connect MFT to existing email clients so that attachments are secure by default. The MFT solution experience must be intuitive, non-intrusive, and value-adding to motivate users to leverage the service daily. 

6. Maintain detailed logs of file transfers

The MFT solution will keep detailed logs of the various aspects of file transfer activity in an organization. Configure MFT to log the following information sets: 

• Originator and recipient: It will record which user initiated the file transfer and the final endpoint or user that received it. Secure credentials will verify their identity. 
• File details: Unlike FTP, files transferred via MFT are fully encrypted, and not even the solution can view its contents. However, it will record specifics like the file name, type, and reason for transfer. 
• Timelines: The logs will also mention when the transfer was initiated, the time taken to travel across the network, time of arrival, and decryption. If the receiving user downloads the file, a timestamp can be recorded for that activity. 
• Communication details: The MFT solution will record which protocol was applied for the file transfer. It will also note the type of encryption used. 

Organizations can customize logging capabilities to meet their unique needs. For example, you can store a duplicate of every file transferred.

7. Centralize management and control via a dashboard

The end-user can benefit from the MFT solution through app integrations, email plugins, and MFT-monitored desktop folders. However, it would help if you also had a centralized dashboard for admin purposes. Ideally, the dashboard should be hosted on the cloud so that admins can access it from any device or browser. It should come with self-service capabilities like file transfer tracking, ad-hoc report generation, user privilege management, etc. The centralized dashboard should also provide admins with real-time statistics on ongoing and recent file transfers, with the option to customize the view. 

8. Couple MFT with automation to process high volumes securely

The real potential of managed file transfers becomes apparent when used alongside workflow automation. Automation allows organizations to fetch data from various sources without setting up the connections manually. It also enables greater standardization of file transfer processes. As a best practice, you can consider automating: 

• File push and pull from Amazon Web Services S3 and other cloud locations 
• Data extraction from Excel spreadsheets 
• Data-triggered business processes – e.g., automatic ticket generation on receipt of email complaints
• Data conversion into a standardized format before passing into analytics 

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Key takeaways

MFT is a secure and effective solution for file transfers in an enterprise. According to the Vanson Bourne and IBM Supply Chain Data Report, 2019, enterprises select MFT for three reasons – security (56%), high volume transfers (51%), and B2B file transfer simplification (44%). Organizations should remember the following takeaways when implementing MFT in 2022:

• Modern MFT solutions are available as a service. This allows you to gain from the flexibility of the cloud and device-agnostic access. 
• MFT will be a $1.7 billion market by 2026, owing to its central role in driving secure and automated data processes. 
• Unlike FTP, MFT mandatorily uses secure network communication protocols like HTTPS, SFTP, and FTPS. 
• A managed file transfer has five steps – upload, encryption, arrival, logging, and automation. 
• MFT applies to both person-to-person as well as system-to-system data transfers. 

As organizations migrate to the cloud and build interconnected data processes, managed file transfers will be a must-have technology. It overcomes the shortcomings of FTP without compromising on functionality. 

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