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Blogs > Quocirca

Who wants sweaty assets?
Clive Longbottom By: Clive Longbottom, Head of Research, Quocirca
Published: 9th May 2012
Copyright Quocirca © 2012
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As the financial climate cooled, Quocirca came across more and more organisations that sang the same song – do more with less, and batten down the hatches of expenditure to ride out the crisis.

Part of the response back from IT on this was to keep assets for longer that they would normally do; “sweating” them to try and gain more value from them before assigning them to the great scrapheap in the sky.

However, older assets can have multiple problems.  They may lack the raw power to meet the needs of the business’ workload requirements.  There may be more failures at the equipment level and a lack of spares with which to replace the failed parts.  Energy usage may be many times more than modern equipment.

Yet, the cost of forklift upgrading hardware is still perceived as being too high – and then there is the cost of equipment disposal to take into account as well.  Securely disposing of IT equipment can be a complex task.  Most pieces of IT equipment – from servers and storage systems, through networking routers and edge of network appliances to individual end points, as well as printers and multi-function devices – will have some form of data storage built in.  This may be via nicely accessibly disk drives, may be in reasonably easily identifiable flash storage cards, or could be hidden within the systems as flash or on-chip memory stores.  Ensuring that all the data stored on different types of devices is securely disposed of can be a task that seems overwhelming and so puts off replacement.  Even when a device has reached a complete end of life, many organisations do a bad job of ensuring that what is thrown out (or disposed of via the waste electronic and electrical equipment (WEEE) directive) is truly done in a secure manner.

To the rescue comes IT lifecycle management, or ITLM.  Although this has been talked about in the past, the main thrust has just been on managing the lifecycle of IT equipment from acquisition through to end of life on a provide and disposal basis.  Now, however, there is a different way of looking at ITLM, taking into account that IT equipment has a curve of inherent value that can be used to an organisation’s benefit.

For example, for the sake of argument, assume that a piece of IT equipment costs £10,000 brand new.  The organisation may write the piece of equipment off over 4 years, using a straight line model.  Therefore, after 12 months, it will have a book value of £7,500, after two year, £5,000 and so on down to zero after 5 years.

But this does not reflect the real actual value of the equipment.  Taking it out of the box, putting it back in the box and selling it on as second hand would probably lower the “inherent value” to, say, £7,000.  As the equipment ages, the inherent value will then drop away in a curve similar to many other goods, such as a car.  In the early days, it is likely to see a relatively fast drop in inherent value which then begins to level out over time.  However, the introduction of new models of the equipment may introduce step changes in the value of the equipment as buyers stop looking to buy this equipment, instead looking to the new model.

As can be seen, this more realistic inherent value model is completely at odds with the book value model.

Now look at this in relation to trying to sweat assets.  The longer you hold an asset, the less its value will be – both at the book and inherent levels.  By being able to intelligently identify the moment at which the inherent value and the incremental business value of new equipment cross over, the costs of maintaining an optimised business IT platform are lowered to the best possible point.

A good ITLM partner should be able to identify this sweet spot for your organisation.  Not only this, but they should also be able to optimise the inherent value through helping to identify the best options for disposal – this may be to hold them for further use, or it could be to directly repurpose the item for resale, or to strip down for parts.  The partner should also be able to offer a range of services for secure data disposal – from over-writing through to maceration of disk drives to the point where data restoration is impossible.  Even where this is carried out, the cost of such secure disposal should be able to be offset somewhat through the scrap value of macerated disk drives – each contains a fair amount of precious and rare earth metals that have considerable value in the market.

A full and proper ITLM approach allows a business to manage its total IT platform to provide the best platform for the business’ use.  It is not about sweating assets, but it is about ensuring that the right equipment is in the right place at the right time – and at the right cost.

Quocirca has a free report that provides a model for organisations to adopt when looking at applying ITLM for their business.  The report can be downloaded free of charge here.

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