President Obama has recently concluded his State of the Union address; most governors have done the same for their respective states. So with 2010 still fresh on the calendar, we felt it would be appropriate to see what the members and associate members think of the past and future of investment recovery and the surplus industry. Short answer? The economy is still fragile, there is a “surplus of  surplus” and IR departments will be depending more on technology and outsourcing,  as fewer people are asked to accomplish more with less. Interestingly, the struggling economy has had both a positive and negative impact on the IR activities of members and associate members. See how your experiences compare with others’.
 
The decade that started on January 1, 2000, marked the start of the 21st century and the 3rd  millennium. During that time, globalization continued to shrink the world, and the September 11th attacks in 2001 dramatically impacted our economy, which struggled to rebound…only to have the double whammy of the housing crisis and the global financial fallout whack the economy at the end of the decade like nothing else in most of our lifetimes. (And as if that wasn’t enough bad news, the Chicago Cubs went 0 for the century!)
IR Visibility Improves. But there is good news. For all the challenges of the last decade, according to a
2010 member survey, more than 83% said it was also a decade that saw a steady improvement of the visibility and relative importance of investment recovery within their organizations. Thirty percent said the visibility and importance of the IR role were “somewhat improved,” and more than 53% felt they were “much better” or “significantly greater.” Only three respondents indicated that the importance of IR was “somewhat worse” in their organization. In addition, more than 85% of the members said that they were “very satisfied” (45%) or “satisfied” (40%) with the value the IR group brings to their organization. (No wonder the relative importance of IR is improving…you’re doing a good job!)
The Economy: The Elephant in the Room. The sagging economy has had–and will continue to have–a significant impact on the daily lives and pocketbooks of both members and associate members. For some, the economy has had a positive impact; more companies are buying used equipment compared to the higher-cost of new equipment. Comments from members on how the economy has affected their IR activities included quotes such as, “Redeployments are much higher.” “The company is more interested in saving money any way possible. This gives new interest and life to recovering lost dollars in assets no longer usable.” “Our activity will increase because of product line closings.” “IR activities will likely decrease in coming years as we hold on to our assets longer.”
One member commented, “Surplus is still being generated, but outside demand/value has diminished. Prices for metal have gone down, so that affects much of what we can recover. I have  high hopes for the year ahead, but it may be a long gradual climb out of this recession. Credit is much harder to come by, and buyers are not wanting to buy on speculation, only if they have an immediate use for the material. Metal prices have been down over the last year, but scrap and base metal prices are improving. I see 2010 as a much better year than 2009.” Another indicated that with the drop in the metals market, the opportunity to ‘shine’ has been affected. “An increase in pricing is already apparent, and 2010 should reflect those continuing increases somewhat, if not dramatically.”
Is it half empty or half full? Many companies are sitting on surplus assets because prices are depressed. With little or no expansion, both supply and markets are compressed to a few industries. Tight credit will continue to make this a challenge in marketing major equipment. As one member stated, “This will probably continue for a while, but the pendulum always swings back.” As availability of credit improves, more buyers will enter the market again, which in turn will bring in more equipment that has been sitting on the sidelines. “It is clearly harder to sell used equipment right now, because the market is flooded due to factory closures. Customers have more equipment to select from that is often newer and cheaper at auction prices, making it challenging to achieve decent returns.”
Yet for some, recent events in the economy have prompted actions to extend investment recovery efforts. “Tough times promote creativity,” as one member put it. “IR activities increase as business units search for opportunities to reduce their spending.” It’s Different for Every Industry. Many  anticipate an upturn in the IT arena with Microsoft’s Windows 7 release and as other sectors such as the automotive and financial industries begin buying computer equipment again as budgets stabilize.
Another in the oil & gas equipment industry had this to say: “The economy has reduced oil & gas drilling and production activity dramatically and resulted in companies cutting their CAPEX. In turn, this has reduced demand and prices for oilfield equipment. The frenzied run-up of demand and  buying leading up to September 2008 exacerbated the problem by leaving companies with large  inventories of equipment that they overpaid for and no secondary market for it.” An associate member in the surplus energy industry said, “Although prices for surplus equipment are down, sellers need to realize that there are interested buyers out there. Whether it’s buyers who conserved cash during the market run-up in 2008, or buyers who are winning corporate points for saving money by buying surplus new, refurbished or used assets, bidder and buyer interest remains strong.”
What changes do you expect to see over the next few years in the operations of your company or in the disposition practices of surplus assets in general? How do you see the practice of investment recovery (or your industry) changing? When asked to respond to the above question, members and
associate members had some interesting insights. The answers ranged widely from a few “Not  much change expected” comments to comments like, “We are working smarter, doing much more research than before. Investment recovery has taken on a much more important role in industry, and I believe investment recovery will be much more under the microscope in the years to come. Our  operation will continue to grow.” Another commented, “In our industry, investment recovery will become more important than in the past as companies discover that they will not be able to consume the inventories built up in 2008.”
Member companies see some specific changes on the horizon. “Today we are tracking items through a manual process; we are looking to automate this through adding some IR software.” “We are growing and becoming a larger global group.” “I expect to see an increase in the IR department because the company has tightened its belt during the slowing economy. When we see a turnaround, new equipment will be purchased, creating additional assets for disposal.” “Possibly developing an expanded internal website that extends externally.” “We are cutting manual process and using technology as a tool to add more manpower to a shortstaffed department. We have partnered with internal departments to improve processes and streamline across the board.” More outsourcing on the horizon. Many members see a significant increase in outsourcing various functions of investment
recovery. Eighty percent of members indicated strong agreement with a question asking if they were being asked to accomplish more with fewer resources. “IR personnel cutbacks were very pronounced.
I see a higher dependence upon external surplus asset marketers (both ‘think tanks’ and equipment dealers).” “I believe that corporate investment recovery professionals will be more about managing investment recovery outsourcing and less about day-to-day sales. In general, I see a trend toward: less direct staff; more outsourced staff; more Internet auctions; more broker and consignment agreements.”
Are we practicing what we preach? In a cautionary note to members, one associate member had the following advice, “As far as the practices of corporations changing, I am surprised at how few in the Investment Recovery Association actually put into their best practices some of the basic tenets of IR, in particular providing necessary information to determine the value of assets. Perhaps they do so with their core surplus assets, but when it comes to IT asset disposition, we have to make offers based on worst-case scenarios.
 
It is our hope that IR departments become more open-minded to solutions that will help them more effectively maximize return of IT surplus instead of taking a hands-off approach.” Are you an ACTI VE member? Somewhat surprisingly, when asked if they considered themselves to be an ACTIVE member of the association, associate members seemed to be somewhat more active than members.

 
Membership Value: Relationships and Relevant Education. ‘Very Active’ participant or otherwise, members and associate members -widely agree that networking with other investment recovery practitioners and service providers coupled with the IR-specific education provided at the seminars is of key value in their membership.
 
“Networking, benchmarking, education and limitless resources” is how one member summed it up. “When attending the conferences, hearing what others in our field are doing and how they are
making improvements and meeting new vendors” was another common theme. “Access to other IR professionals who are VERY willing to provide assistance or expertise is wonderful. The organization
has a significant number of very knowledgeable individuals who are always willing to share their knowledge.”
 
Many expressed an appreciation for the articles in ASSET 2.0. Almost 75% have forwarded hard copies of the publication or used the online listing of articles (now more than 80 topics and 24 past issues available on the association website!) to forward to others. However, like members of any organization, many felt they didn’t take full advantage of all that the association offers, for various reasons. “I don’t take full advantage because IR is a small part of my total responsibilities and is not treated like a business unit. I mainly am involved in large project recoveries.”
 
Challenge to the Association. Two themes were consistently mentioned as prime responsibilities for the association to accomplish in the decade ahead:
1. Continue to improve the image of IR to corporations. “Reach out to more CFOs & CEOs so that they better understand the importance of investment recovery and how it can affect their bottom line.”
2. Market and grow the association’s (corporate) membership to remain vital. “I am hoping the association can help our business grow as we identify more member companies in need of our services.” “I would love to see the membership double!!”
Any survey is simply a snapshot of opinion. But your opinion is really important! There were hundreds of responses to this survey, all of which are being reviewed by the Board and Strategic Planning Group. Thoughts on how to move the Investment Recovery Association and the IR industry into the new decade are welcome, needed and necessary for our continued growth. Make this the year you become a ‘Very Active’ member!