A major task in any IT department is the specification, evaluation, and installation of new equipment. From PCs and servers to network routers and switches, the torrid pace of technological advance means a constant stream of hardware into data centers and offices. Unfortunately, acquisition is just the beginning of the asset life cycle, and organizations often lack the same processes and rigor when eliminating obsolete equipment as they exhibit when buying new. Given the well-recognized environmental hazards lurking in most electronics, the dumpster is no longer an acceptable disposal strategy, and while there are a variety of asset removal options for old hardware, successful execution means planning and effort from already overworked IT staffs.

Out of this need was born the reverse logistics, aka asset recovery, business—service providers or in-house departments that assume the task of decommissioning, reselling, and recycling old equipment. While the term “reverse logistics” is sometimes used to describe electronic equipment disposal services, it’s an imprecise usage because, according to the Reverse Logistics Association, its vendors are more generally involved in the gamut of processes involved in transporting previously purchased products from customers back to the manufacturer, whether for repair, customer service, or returns processing. The more common industry term is “asset recovery service.” A typical example is Dell’s (www.dell.com), which is described as providing “the logistic and disposal capabilities to recover and dispose of owned and/or leased computer equipment in a secure and environmentally safe way.”

Asset Recovery Services and Process

Breaking down Dell’s summarization, most asset recovery services incorporate several key steps: asset auditing, hardware deinstallation and removal, data protection, asset resale, reuse or remarketing, and recycling. A complete inventory and audit of decommissioned hardware is an important first step to many customers according to Operations Manager Cliffie McKay at DMD Systems Recovery. Asset recovery vendors offer a variety of options when decommissioning equipment.
According to McKay, some customers leave everything in place and let DMD do all the disassembly, while others pack equipment themselves on pallets ready for shipment. Of course, as with moving van lines, the convenience of having someone else do the packing comes at a price, with DMD charging by the hour for any deinstallation work. Once packed, hardware is shipped to a vendor’s facility for processing, the first, and perhaps most important, step of which is data sanitization and destruction. Ever since some highly visible and embarrassing cases of lost or stolen disks creating security headaches for everyone from the U.S. Department of Veterans Affairs to Fidelity Investments, every IT manager is keenly aware of the need to purge hard drives prior to reuse.
Asset recovery services use a number of techniques for data protection ranging from overwriting or degaussing (for reusable devices) to mechanical or chemical destruction. Systems passing diagnostic tests are either resold or donated to charity, with vendors using a variety of methods to value used equipment. For commodity items that tend to resell rapidly and in quantity, such as generic Pentium 4 desktops, many services keep regularly updated internal pricing sheets, while others may use a third-party data aggregator such as the Orion Blue Book (orionbluebook.com), a service that amalgamates pricing data from nationwide dealer surveys. According to McKay, nonstandard equipment is usually valued as a percentage of the wholesale price from an equipment 1171 broker.

Extremely old equipment that is effectively obsolete has no significant monetary value; however, it’s often still useful to charities or nonprofits. Asset recovery brokers can act as a liaison to these organizations, ensuring that they get clean, tested, functional equipment. Nonfunctional hardware is marked for reuse and recycling— similar terms with a subtle distinction. Some systems may fail a comprehensive test but still have functional components. These are cannibalized and the components—video board, hard drive, NIC, etc.—reused as spare parts. Equipment that’s  degenerated to doorstop status is marked for recycling where individual components—plastics, circuit boards, glass, batteries, etc.—are sorted and sent to recyclers.

Given the churn in most companies’ hardware inventories, you don’t have to be a tree hugger to appreciate the benefits of reuse and recycling—it makes financial sense both in recovery of undepreciated value and efficient use of precious IT staff. The actual financial return can vary widely depending upon the type, age, and condition of equipment, but the benefits in convenience and data security may make employing a professional asset recovery service a winning proposition.
Reprinted from ASSET 2.0, the Investment Recovery Business Journal, Vol. 4, 2007

© The Investment Recovery Association – originally reprinted from the April 20, 2007, issue of Processor