This is often a hotly debated as to which is better, especially in South Africa where the costs of digital recorders are still quite high. From the transcriptionist's point of view however there is no real contest, if we had our way it would all be digital.
Why I hear you ask, well the answer is simple. The pros of using analogue dictation are mainly that the cost of the dictaphones are quite inexpensive. The cons however are many. The most traumatic for any transcriptionist is the faulty tape. this could be anything from the tape has stretched, broke, twisted or any of the other problems that tape is prone to. When this happens there is very little that can be done to retrieve the dictation. If you take into account that if you use your tapes often at least once, if not more a week, then they ideally should be replaced yearly the relatively low costs of an analogue dictaphone are no longer so cheap.
Also with analgoue dictation, for the quickest turnaround the dictator and transcriptionist ideally need to be in quite close proximity.
The cons of the digital dictaphone can be that they appear cost prohibitive, especially for the new up and coming business owner that wants to take advantage of them. The pros however are vast. The chances of loosing a dictation are usually pretty slim, unless you actually manage to delete it off the dictaphone yourself, therefore you won't have the problem of having to redictate letters. The transcriptionist can be and sometimes are located anywhere in the world. As long as the dictator and transcriptionist have access to one of the following (and this is just a basic list) then they can easily send the dictation and the finished work anywhere in the world), email, internet access, or FTP server. Obviously email is not necessarily secure but there are many websites that offer secure (meeting HIPPA security requirements in the US) file transfer.
Digital files can be quite large depending of the file format but they very often can be reduced in size iwth a little bit of experimenting with file formats.
Therefore, if you are interested in having work transcribed and you want to receive the best possible product then to be honest there is nothing better than going with the digital option.