Cash For Clunkers: Old Tech Boosts The Bottom Line

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June 2011

Like most big companies, GlaxoSmithKline had systems in place to help keep track of its computers, servers and other IT equipment.

Even so, equipment would still fall through the cracks — employees would leave, and managers would forget to call the desktop services group to pick up their computers. Or workers would need extra machines for special projects but then fail to turn them in when the projects were complete. Or people would ask to hold on to old computers after an upgrade to clear off data, and the unit would fall off the roster.

Multiply those instances over several years, and you wind up with a big pile of unused tech gear.

That's what Armin Jahromi, service development manager for GSK's IT desktop services group, discovered a few years ago when he decided to take a hard look around the company's physical plant. "There was a lot of IT equipment lying around — laptops, desktops, monitors, all types of equipment," he recalls.

But where other managers might have envisioned big disposal bills, Jahromi saw another possibility: potential revenue. He rolled up his sleeves and went to work, partnering with PlanITROI, a Denville, N.J.-based asset value recovery company, to recoup cash from end-of-life IT gear.

Over a two-year housecleaning period that involved more than a half-dozen sites housing 20,000-plus workers, GSK's IT department took in an impressive $1.8 million — that is, 60% of the total amount earned, with the remainder going to PlanITROI.

Refurbish and Resell
Many companies struggle with finding the best way to get rid of outdated computers, servers and the like. The days of tossing units out with trash bound for the landfill are long gone, thanks to increasingly stringent recycling laws.

Companies can certainly get a recycling vendor to haul away tech trash, but fees vary widely, and the hassle can be considerable, in part because it's not always easy to determine whether these companies are getting rid of the e-waste in a responsible way.

Now, some organizations are trying an alternative; refurbishing and reselling their old equipment, either on their own or through a third party, to bring money back into the company coffers.

And as the GSK case shows, this can be more than pocket change. For companies that understand the potential returns and implement the right collection policies, the result could mean tens — even hundreds — of thousands of dollars.

For large firms, "savings in the millions of dollars isn't that unusual. That's a common number once they have a mature program in place," says Barbara Rembiesa, president of the International Association of Information Technololgy Asset Managers (IAITAM). "It's a matter of understanding the value [of IT assets] and bringing the value back to the company."

Jahromi's work is case and point.

He developed a policy whereby older equipment that's still functional and under warranty gets redeployed within GSK; gear that's out of warranty is resold or, if there's no market, recycled. PlanITROI handles that part of the job.

Much of what Jahromi collected during GSK's housecleaning two years ago was fairly current equipment — generally ranging from three to eight years old — although the comopany also collected older flash drives, CDs, monitors, printers, cables, fax machines and even an electric typewriter when it moved on of its data centers.

Jahromi admits that he didn't expect to get much money selling that typewriter, but he was surprised by the amount of money that the IT department was able to get by working with PlanITROI.

The agreement between the firms calls for PlanITROI to keep 40% of the asset value when it refurbishes and resells GSK equipment. (Refurbishing includes installing Windows software with an authorized Microsoft license.)

"It's rare for an IT organization within a company, a non-IT company, to earn revenue," he says. "We now take that revenue and pump it back into the purchase of new equipment. So we're recycling the machines and the money."

Not all organizations are following GSK's example. In a 2010 IAITAM survey of some 150 IT managers attending the organization's annual conference last year, only 56% of respondents said they consider the disposal of hardware and harvesting of software a priority, and only 14.3% listed cost savings or money-making as a matter of high importance for their organization. "As far as companies and the maturity of IT asset management, we're still very young," Rembiesa says. "There are companies that have a good maturity out there; others are just coming on board."

Right now, most firms use disposal companies, she says, and many of those disposal companies turn around and resell equipment on the secondary market – but the original company often does not benefit from that resale cycle.

"It's up to [the owner of the IT assets] to negotiate a return on any resale," Rembiesa says. "Some disposal companies are giving it back [to the original company], some are not. But with a little bit of due diligence, organizations can find a company that can give them a return."

Organize Your Assets
How can companies ensure that they're reaping the maximum return on their assets? By centrally managing their IT gear, which gives them insight into their entire inventory.

Another important step is to collect all necessary components and handle simple fixes in-house. Including the AC adapter with a laptop, for example, can boost its resale value by $20 to $40. It might not seem like much, but an organization reselling hundreds or thousands of laptops during a refresh cycle could see a considerable difference in cash or credit.

GSK's Jahromi says those steps are well worth the trouble. After seeing nearly $2 million in returns from clearing out old equipment, he has instructed his IT department to make sure equipment doesn't sit around idle and is either put to use, sold or otherwise disposed of.

Beyond that, Jahromi is fine-tuning GSK's refresh cycle to ensure that it doesn't extend so long that old equipment isn't worth anything.

Over the past two years, in response to the recession, the firm extended its refresh cycle from three years to four, but it decided against five years because that extra year would have significantly diminished the value of the equipment on the secondary market, Jahromi says.

Hitting that "sweet spot" is something of a challenge, but it's one Jahromi says he enjoys. "This is where the science of it comes into play," he says.

Learn how the PlanITROI Asset Value Recovery Model can help you gain more time in your day and enhance your IT budget. See Our Model.

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