by Brian J. Folkes
 
Disposing of surplus IT assets (telecommunications, networking and data communications equipment) presents unique issues and options for investment recovery managers.
 
Why is IT product different from any of the other assets you dispose of on a regular basis? There are many reasons, but the primary one is that IT probably isn’t all that important to you or your company. Most of the members of the Association come from industrial corporations. Disposing of a nuclear reactor brings in far more revenue than 1,000 out-of-date computers or telephone systems. The emphasis for your department is disposing of the primary assets that your company deals with, be it copper, transformers, closed plants or environmental waste. From discussions I have had in the hallways during the breaks in the various Investment Recovery Association conferences, one thing is perfectly clear: you don’t have the time nor the resources to give all aspects of asset recovery your full attention. Such is life.
 

But you do have a responsibility to the role of asset recovery and asset management in all areas of the company. One of the first aspects of that responsibility is to know when to make the decision to

dispose of surplus IT assets. Often times this is not in your control and is a function of the number crunchers and the tech heads who usually don’t want to get rid of ANYTHING.
 

However it is decided in your company, when an IT asset is to be disposed of you can be sure it is always after it has exhausted its useful life span and, like surplus inventory of buggy whips, not
worth much. As asset managers, it is always best to be involved in the decision making process with purchasing and IT in order to have an orderly turn-over of product that you control so you can

develop a cradle-to-grave process for IT equipment. Oftentimes if you are leasing IT product this becomes a function of your vendor. Blessings to those who can have such a program! It will make your life easier and gives purchasing a sledge hammer to negotiate next generation pricing based on return of leased equipment.
 
For the rest of you, you will need to develop a way to get involved in the process and wrestle control from the powers of the IT group. Why? Under Sarbanes-Oxley you have tremendous responsibility for your company’s assets. Like it or not, it is your keester on the line, not the IT manager. So just how does surplus build up with IT equipment? Surprisingly, in many ways. Some may have to do with overbuying for a project that wasn’t as deep as originally thought or perhaps doesn’t even materialize. Sometimes it may be the end of a program and the equipment is no longer necessary. It
could be because changes to a program have been implemented and what was thought to be mission critical is now not. Of course, there is always the normal upgrading of equipment to the latest and greatest bleeding-edge technology (for 5 minutes) and sometimes the unfortunate “OOPS! We have a distress sale on our hands and need to close a facility.”
 
The reason “why” you have surplus is important. It gives you latitude for employing the many disposal options available to you.. It determines your ability to work quickly or slowly. It determines your methodology. And, perhaps most important, it determines your return on investment. Here is a short rule of thumb for asset recovery: the time allowed for disposing of surplus assets and the return of investment on those surplus assets is directly proportional.
 

Disposal Options
The reason you are disposing of assets is an important element in devising your strategy and options to optimize your disposal practices. So what are your options? FIRST AND FOREMOST. . .always

reuse within your corporation! Before you ever call a re-seller to make a bid or consign product, find a home for it in another department, division, location, or subsidiary. The longer a piece of equipment can be used productively extends its life and costs your company less in the long run. Having said that, there are some things you need to take into account. Moving equipment from one department to the next costs money.
 
Ultimately you are responsible for your company’s bottom line. To re-use a piece of equipment that may need to be accounted for, upgraded, repaired, or modified may cost more money than selling the equipment. Costs may be hidden and your job is to account for all such costs that may occur.
 

Other options include charitable donations. This sounds like you are doing your community and others less fortunate a favor but it isn’t always so. Obviously, work must be done to insure the product is fully functional. Beyond that it is imperative that you make sure you are matching what you have with an actual need. I encountered one such company a few years back that donated its surplus computers to a local school board in Marin County, CA. Within days of the donation they received a call from the Superintendent of the Schools berating them up one side and then another. Telling them “how dare they send out-of-date computers to their students.” The company ended up retrieving the computers at extra expense and disposing of them through a recycler. In Hollywood they say any

publicity is good publicity. In the business world that isn’t true.
 

Sometimes you have no choice but to properly dispose or recycle equipment. Sometimes it’s just because of age. I mean how many 286 computers can you use as door stops? Unfortunately, too

often, I have seen that product ends up being recycled because someone didn’t pack it up with a power supply, battery or other necessary piece of equipment. It is imperative when equipment is removed from a work area it is removed with all parts and cables and accessories intact and kept together. Cabling should be wrapped and not tangled. All equipment should be properly packed to prevent damage. It truly is a shame when otherwise reusable equipment is recycled for lack of a power supply or a twisted cord. Another aspect of recycling is to have local control and make sure you are dealing with a reputable company. If data on a hard drive were to get out because it wasn’t properly erased or the drive destroyed, there can be serious legal consequences to your company.
 
Likewise, certificates of destruction often aren’t worth the paper they are written on. For sensitive material, like hard drives, or environmentally sensitive products like monitors, it is best to have a company representative present for the destruction or, at the very least, make sure you know who you are dealing with, how they are handling the destruction, where it is taking place and what happens to the material afterwards. There have been too many news stories of monitors and other hazardous material making their way to China where they were being “recycled” by barefoot children using ball peen hammers to break the glass, releasing lead and phosphorous to these under-aged workers. It is considered bad form when your asset tag shows up on a 20/20 or 60-MINUTES report.
 

One of my favorite ways to dispose of surplus when I was an electronic components buyer was to negotiate a return to the vendor from whom you bought the product in the first place. It is an often

overlooked negotiating technique for a purchaser because you have to bust some chops, but it is a powerful technique that can lower the cost of new equipment and puts the onus on the salesperson to make a satisfactory deal for your company.
 
Of course, you can always sell it. The beauty is when you sell it, what was once a neglected step child becomes a new tool for another company or person. Think of it as your equipment having an afterlife.
 
Reprinted from ASSET 2.0, the Investment Recovery Business Journal, Vol. 1, 2006

© The Investment Recovery Association