Measuring the value of IT Asset Disposition

Most organisations have more idle IT assets than they need and very few know how many there are and where they are located. Implementing a mature IT Asset Disposition (ITAD) program will enable an organisation to reduce the number of surplus and idle IT assets and increase asset utilisation.

IT Asset Managers should seek to understand how ITAD services providers add value to the process. An ITAD vendor that takes a proactive role can start as early as the planning process for asset acquisition, and continue through the product lifecycle and into asset disposition.

As an advisor, the ITAD vendor can help make refurbishing decisions that preserve maximum resale value. By remarketing client’s IT assets through retail channels, the ITAD vendor specialising in asset value recovery helps clients make more money from IT asset disposition while fully meeting environmental and data security standards. Gartner says the adoption of a reuse program, as an integral part of IT Asset Disposition, should enable organisations to reuse of over 48 percent of all desktop equipment. However, it says many large organisations routinely fail to reuse more than 20 – 25 percent of their technology.

Xperien CEO Wale Arewa says there many inherent risks associated with technology retirement. “Most IT asset managers would consider environmental compliance and data security at the beginning of the road. Additionally, asset managers need an objective metrics to measure and benchmark ITAD vendor performance. Establishing a few Key Performance Indicators (KPI) for one’s asset disposition program will enable continuous improvement in financial, risk mitigation and environmental terms, and allow one to hold the ITAD vendor accountable to a higher standard.

Organisations can increase Return on Investment (ROI) by maximising the time each asset is in-use during its life. Every time an asset is out of use, another asset is required to take its place. A managed program will deliver a lean service that frees up idle assets quickly and reduce the number of assets held in churn. An efficient ITAD program should capture all hardware assets as soon as they become redundant and deliver significant opportunity to increase ROI through optimisation and the deferral of procurement expense. The program should recognise qualifying assets and divert them directly back into the control of the Asset Manager, increasing the time that each asset spends in-use during its life.

“The lean model that we use, reduces the time from decommission to redeployment. This means our clients can operate with less surplus assets, without compromising business continuity,” he explains. Reusable Yield is that percentage of all devices removed from service that are still suitable for further use, whether for donation, resale, redeployment or any other purpose requiring the original utility of the asset. This is the uber-metric for driving superior financial and sustainability outcomes.

Arewa says the current norm is for ITAD vendors to recycle a large majority of what they receive. “The best practice is to evaluate every asset for its economic and utilitarian potential and if found reusable, then one could repair and refurbish for further reuse.”

Average Sales Price (ASP) combined with Reusable Yield determines the financial performance of one’s asset disposition program. Every repurposed device is ultimately destined for an end user, making the optimal resale price whatever an individual end-user is willing to pay. “But the ITAD industry default practice is to remarket in bulk at wholesale prices, requiring that every gadget pass through multiple hands on its way to said end-user and diluting value recovery for everybody. The typical ITAD vendor simply divides the pie into too many pieces,” he says.

Elevating ASP to end-user levels requires that merchandise must be end-user ready, including all accessories, consumables and software required for operation. The condition of the item must be good and it must be packaged for individual sale. Arewa says the investment required to bring a used device to this state of retail readiness should be proportional to the increase in value over selling the item in bulk. “So an accurate understanding of wholesale and retail market values is necessary to calculate the ROI from refurbishment.”

“After security, the CIO only cares about Total Cost of Ownership (TCO). As a general rule, minimising TCO can never be accomplished by maximising the proceeds from an ITAD program. Longer lifecycles do reduce TCO, but also reduce value recovery upon retirement,” he adds.

Redeployment programs that refurbish and reuse existing enterprise inventory are tremendously cost effective compared to buying new, but also divert inventory away from ITAD value recovery efforts. Other dispositions such as technology donations or employee sales may produce tangible value for one’s business, but likewise reduce remarketing returns. The highest ITAD value for a company may therefore best be realised by planning for lower value recovery. Finding the sweet spot in lifecycle planning terms gets complicated, because longer lifecycles also reduce Reusable Yield and ASP.

“Often the best answer is to plan for less value recovery at retirement, even budgeting for your ITAD program to incur net costs in order to realise the lowest possible TCO. Improving Reusable Yield and ASP always boosts financial results, so work to improve these KPIs directly reduces TCO, regardless of your company’s lifecycle choices,” he concludes.

By establishing best practices for a forward-looking ITAD program, organisations can reach the conclusion that being compliant with environmental and data security requirements as well as realising a significant ROI are not mutually exclusive.

 

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