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Asset Disposition

VIEWS: 86 PAGES: 18

									        Asset Disposition



End-of-Life Hardware Issues and Options
Introduction
Are your end-of-life computer systems assets, or liabilities?

What are the best practices available for asset disposal?

Recognition of the importance of a sound IT asset disposal policy is growing rapidly. The
correct policy is often the difference between whether end-of-life computers are assets or
liabilities.

Supreme Asset Management & Recovery (SAMR) prepared this report to inform you of
asset disposal issues and options. We encourage you to choose asset disposal policies
which minimize your liabilities in the areas of data security, law, the environment, and
disposal costs, in agreement with your data security and environmental policies. Proper
choices mean your assets remain assets at end-of-life after a 3-year, 4-year, or even 5-
year refresh cycle.

Using the best asset disposition options decreases the total cost of ownership, which can
change your best procurement choices.




Supreme Asset Management & Recovery                             www.SAMRecovery.com
Executive Summary
Many asset disposal options are commonly used by large corporations. Particularly poor
choices are storage, which delays but does not eliminate end-of-life costs, and dumping,
which creates an environmental liability while violating laws and regulations. We
recommend asset disposition services involving remarketing and recycling for the data
security, financial, and environmental benefits.

Data security is the #1 concern of companies considering asset disposal, although many
companies are unsure of the best policies. Releasing sensitive customer, patient, and
company information on old hard drives is embarrassing and harmful. Several federal and
state laws require data security measures. Formatting is common but not sufficient, and
any service provider’s policy must be checked. We recommend a military-grade wipe
which securely sanitizes hard drives while preserving remarketing options. The best
wiping options require time and a method for physically destroying drives when the
wiping procedure fails, as well as a tracking system for ensuring that all systems are
wiped.

Computer systems are environmentally safe during use, but proper disposal requires
sophisticated equipment and expertise due to the complicated mix of toxic materials.
State, federal, and international environmental laws regulate the disposal of computers.
We recommend careful auditing of recycling service providers to avoid the
embarrassment and liabilities which result from sham recycling.

Efficient remarketing provides a positive end-of-life Return On Assets (ROA) and
decreases the Total Cost of Ownership (TCO). Remarketing makes shorter refresh cycles
more attractive than longer cycles, and purchasing more attractive than leasing, by
decreasing the TCO of these options relative to others.

SAMR asset disposition services satisfy corporate needs, protect and indemnify against
liabilities, and provide a return on end-of-life assets 6 or more years old. End-of-life
assets are still assets with SAMR Asset Disposition.




Supreme Asset Management & Recovery                                     1-866-509-SAMR
Asset Disposal Options
Excess and end-of-life options include redeployment, lease return, remarketing, donation,
storage, dumping, and recycling. All of these are commonly used by medium and large
businesses.

Redeployment
Excess computers in particular can be relocated within a company. Older computers can
be redeployed (cascaded) to where hardware requirements are less intense. If the
computer is retained within the company, the data security liability is reduced, and simple
deletion rather than true data destruction may be appropriate for less sensitive data in
some companies.


Lease Return
Returning equipment at the end of the lease period passes some of the responsibility onto
the vendor, depending on the lease agreement. Many companies find they still have
disposal liabilities despite leasing equipment.

Within the normal operating lease procedure, the equipment is returned to the vendor.
The company should wipe its own data, or else ensure that the vendor’s data security
services are adequate and its security policy is enforced. According to a Gartner, Inc.
report,1 “Many businesses mistakenly believe that the lessor will sanitize the drives in
such a way that the data residing on those drives cannot be recovered. In most cases, that
is incorrect.” Some techniques a company may wish to use to secure the data are
incompatible with the lease conditions. Further, it is the company’s responsibility to
ensure that the lease return occurs on schedule and without disrupting the work flow.
Companies often bear the reverse logistics and disruption costs of normal equipment
disposal to avoid an expensive unplanned lease extension.

Replacing a leased system at 3 years is not always desired, so companies often exercise
the option to purchase the system at the end of the lease period. In that case, the full
responsibility for asset disposal falls upon the company 1-3 years later.


Remarketing
(See the Remarketing Value section.) There are active domestic and international markets
for used and refurbished computers. Remarketing returns value on the assets, and reuse is
the optimal environmental practice. Whether a company attempts to remarket computers
itself or uses a remarketing service with more resources, the company still faces data
security and logistical issues.


1
 Gartner, Inc. “Carefully Consider Leasing When Using It as an Equipment Disposal Methodology.”
October 2006


Supreme Asset Management & Recovery                                     www.SAMRecovery.com
Donation
Many computers are donated to schools, libraries, charities, and other not-for-profit
institutions. However, the minimum acceptance criteria have risen, and the company still
must address the data security and logistical liabilities.


Storage
In a 2006 Gartner, Inc. survey,2 companies admitted to storing 17% of their computers at
end-of-life. This defers but does not eliminate the liabilities associated with disposal. It
may incur soft storage costs estimated by IDC in 2000 to be $10/system per month for 36
months.3 Storage wastes the remarketing value of the asset. IDC estimated that
companies wasted over $250 per system from lost remarketing value.


Dumping
(See the Environmental Considerations section.) Due to the lead, mercury, cadmium,
brominated flame retardants, and other toxic chemicals, end-of-life computer systems are
hazardous waste and their disposal is regulated on the state, federal, and international
levels. Computers do not belong in landfills or incinerators. The EPA4 warns that these
toxins “may leach out in conditions typical of municipal landfills.” Incinerating e-waste
releases unacceptable levels of dioxins, furans, and other toxic chemicals. However,
many computers are still thrown away, directly or by passing the material to international
dumpers. This risks fines, lawsuits, and embarrassment.


Recycling
(See the Environmental Considerations section.) Specialized computer recyclers can
break down computers into components, and components into raw materials for reuse.
This is the environmentally responsible alternative to dumping obsolete and
nonfunctioning equipment. It is important to audit a recycling service regularly to ensure
that proper data security policies are in place and that the responsibility for recycling has
not been passed on to someone who will dump the computers.


All-in-One: Asset Disposition
An asset disposition service can help you to determine which option is appropriate for
each system, and implement that choice. All of these options have the potential to involve
data security, reverse logistics, and transportation costs. A complete asset disposition
service implements your data security policy, removes the systems from your desks and
storage, and transports the equipment to a processing facility while providing full
accounting.

2
  Gartner, Inc. “IT Asset Management Conference 2006 Survey Results: IT Asset Disposition.” December
2006
3
  Reported by Dan Neel. “Costly computer casualties.” Infoworld. April 7, 2000
4
  U.S. Environmental Protection Agency. http://www.epa.gov/ecycling/rules.htm


Supreme Asset Management & Recovery                                              1-866-509-SAMR
End of Life Data Security Facts
Data security liabilities and privacy risks are the #1 concern of companies surveyed at the
Gartner IT and Software Asset Management Conference 2006.5 Proper data disposal is
not just a good idea, it is legally required for some companies and some types of data
under the Gramm-Leach-Bliley (GLB) Act and Health Insurance Portability and
Accountability Act (HIPAA) and other state and federal laws. We’ll discuss common
misconceptions and the facts of end-of-life data security.


Deleting and Formatting

Deleting files is insufficient.
This just throws away the
map of files, but the files are
still there, and are easily
recovered.

Formatting is insufficient.
Formatting is very similar to
deleting files, although
historically it used to mean
something different. There is
a widespread misconception
that formatting is an
appropriate method for
sanitizing hard drives.6
Formatting may overwrite
only 0.1% of the hard drive.7

Many programs and services
exist for recovering data after
formatting. Our tests show
that unformatting software
works even after multiple
formats, and they have partial
success after an operating
system is reinstalled after formatting. Formatting is an unacceptable option, as it does not
secure your data.



5
  Gartner, Inc. “IT Asset Management Conference 2006 Survey Results: IT Asset Disposition.” December
2006
6
  Microsoft. http://www.microsoft.com/australia/smallbusiness/issues/technology/protect/harddrive.mspx
7
  Garfinkel and Shelat. “Rememberance of Data Passed: A Study of Disk Sanitization Practices.” IEEE
Security & Privacy. January/February 2003


Supreme Asset Management & Recovery                                      www.SAMRecovery.com
Data Destruction
Overwriting (wiping) is recommended. To render data unrecoverable from any
software and almost all commercial data recovery services, it is enough to overwrite the
entire drive once.8 Better is to write a randomized stream of data, and to verify that this
data has been successfully written to the drive.

Care must be taken to wipe not only the currently occupied areas of the disk, but also the
“blank” areas which often contain remnants of deleted or duplicated files. It is also
essential to wipe the Windows swap file area where data normally stored in memory can
be found. This may contain sensitive information even if no sensitive files were saved to
the hard drive, e.g., when all sensitive data was stored on a remote server. Some wiping
software fails to include these areas.

After overwriting one time, highly redundant data, such as text files with backups, may
be recovered in some cases using laboratory techniques such as magnetic resonance
microscopy. Most commercial data recovery services do not have this capability, but
some do, as do some government agencies. The US Department of Defense DoD
5220.22M standard involves 3 overwriting passes. Other military standards involve 3-7
overwriting passes, and some security experts have recommended more for the most
sensitive data.

If overwriting more is better, why not use 100 passes? Because wiping uses the physical
capabilities of the hard drive itself, the speed is limited. Overwriting an entire drive
requires a significant amount of time, often much more than formatting. Smaller drives
can be overwritten once in a few minutes, but larger drives can require an hour or more at
the fastest physical rate at which the drive can write data. Many wiping utilities are not
optimized for speed, and can take several times as long as the physical limit. IT
departments preparing to wipe hard drives themselves should schedule a large amount of
time for this task.

Historically, bad sectors on hard drives were atypical. On larger hard drives, the higher
data density and lack of redundancy increase the chance of developing bad sectors, and
bad sectors are now much more common. Bad sectors may be unsuitable for normal use
where a single error in an executable or data set is intolerable, but bad sectors may be
readable with over 99.9% accuracy. The bad sectors on a working hard drive can contain
10-100MB of sensitive data which might be very damaging when 99.9% accurate, and
which may be overlooked by a poorly designed wiping algorithm. Check to make sure
your wiping software correctly wipes bad sectors, or else you risk exposing several
floppy diskettes of sensitive data.


8
 Garfinkel and Shelat. “Rememberance of Data Passed: A Study of Disk Sanitization Practices.” IEEE
Security & Privacy. January/February 2003


Supreme Asset Management & Recovery                                              1-866-509-SAMR
SAMR uses customized Blancco software for disk wiping, and uses military-grade wipes
at the DoD 5220.22M standard or better. Blancco is an international data security
company with award-winning disk wiping software. Blancco implements military-grade
algorithms at the physical limit of speed, wipes bad sectors, and reports any failures of
the wiping process that would warrant physical destruction. We’ve worked with Blancco
to produce an efficient system for wiping large quantities of hard drives at the same time
while producing an individual report on each system.

Encryption is recommended during life. Proper encryption prevents the exposure of
your data if a system is compromised, stolen, or is not wiped at end-of-life. However,
encryption does not eliminate the benefit of wiping. Releasing large numbers of
encrypted hard drives makes additional types of cryptographic attacks possible which are
not applicable to individual drives. Further, computing and cryptographic progress in the
coming years may show that some of the currently accepted standards are inadequate. It’s
better to destroy the data, too, rather than just to hide it well.

Physical Destruction
Another option is physical destruction. The speed of destruction is not limited by the
writing capabilities of the drive, so physical destruction may save time. However,
physical destruction has the disadvantage that it destroys the hard drive, which makes up
a large fraction of the resale value of the computer. It is hard to verify that a physical
destruction method has actually destroyed the data rather than just preventing normal use
of the hard drive. Physical destruction is not as simple as it sounds.

Hammers are not recommended. To our surprise, we found that a large government
agency attempts to sanitize hard drives with sensitive financial records by hitting the
drives with a sledgehammer. Hammering a hard drive until it stops working is simple, but
it requires much more damage to remove the data than to disable the drive. Although
removing the platters and smashing them repeatedly may be acceptable, typical non-
experts will stop the hard drive from spinning while failing to damage the data-bearing
platters. Undamaged platters can be transferred quickly to a working hard drive.

Degaussing means exposing the hard drive to powerful magnets. Ideally, this will destroy
all of the data rapidly. Degaussing still destroys the intrinsic value of the drive because
the control and synchronization data present on all hard drives is destroyed along with the
contents. Just as with a hammer, preventing the normal use of the drive is very different
from destroying the data. A poorly calibrated degausser may render most of the bits
unreadable using the hard drive itself, while leaving the data readable with moderate to
high accuracy by laboratory techniques such as magnetic resonance microscopy.9
Magnetic resonance microscopes are available to a few commercial data recovery
services as well as government agencies. Testing a degausser requires the use of the
laboratory equipment yourself.



9
 Peter Gutmann. “Secure Deletion of Data from Magnetic and Solid-State Memory.” Sixth USENIX
Security Symposium Proceedings. July 1996


Supreme Asset Management & Recovery                                   www.SAMRecovery.com
SAMR uses a shredder for destroying hard drives. We use the shredder on hard drives
which do not function, and are unable to complete the Blancco wipe, as well as on the
hard drives from customers who request physical destruction. Our shredder converts hard
drives into twisted shards of metal smaller than a finger.

                 Cost of Data Extraction After Sanitizing Hard Drive
        $
   100000000                                                                    Beyond known
                                                                                technologies***
    10000000
                                                                 $1,000,000**

     1000000
                                                    $50,000*
      100000


       10000
                                      $500
        1000
                       $50
         100


            10
                  Formatting    Hammering      1 Overwrite     DOD 3-pass      7-pass wipe
                                                  pass           wipe

* Based on estimates from commercial magnetic force microscopy, which may not work on all drives. May
require redundant data. Some degaussed drives may be similar.
** Speculation based on mathematical models of overwriting. May require highly redundant data.
*** Also applies to shredded drives.

A great algorithm is not sufficient if it is not used. It is important to verify that all hard
drives have been wiped. SAMR uses RFID-based security during transportation, an
advanced RFID warehouse tracking system, and the Blancco reports produced upon
wiping. These ensure that the hard drives are confirmed wiped and provide an audit trail
through the point of data destruction. Other SAMR options include onsite wipes, both
before and during pick-up. We can include instructions and licenses of Blancco software
in our previsit kits to enable the IT department to wipe critical systems before we arrive,
and we can wipe systems individually and in groups during the pick-up. These require
more time than using our facilities, but it makes sense for particularly critical data or
strict data security policies.

Although some experts have expressed concerns about the redundancy of wiping both
onsite and after pick-up, we disagree. Depending on tracking which systems were wiped
adds a critical point of failure for little benefit. We recommend wiping all systems
again, whether or not they were wiped on site. This ensures that all systems are wiped.
We recommend wiping all systems whether or not it is believed that they contain
sensitive data, which ensures cascaded systems and swap files of terminals are wiped.


Supreme Asset Management & Recovery                                              1-866-509-SAMR
Remarketing Value
Remarketing value depends on dynamic market conditions. This discussion represents the
conditions as of April 2007, which quite predictably will change in the future.

In a report from 2005,10 Gartner, Inc. suggests that “in the third year… resale value is
approximately 5 to 7 percent of the original equipment cost. For machines disposed of in
the fourth year or later, sale proceeds would be close to zero.” At that time, the estimated
costs were minimized by a brokered sale or auction, $56/PC, and outsourcing, $61/PC.
We believe current market conditions differ, as detailed below. Under current market
conditions, functioning systems retain resale value significantly longer, into the 7th year.

In a past publication,11 Gartner, Inc. suggested the following sample schedule for excess
and end-of-life assets:

0-24 months: Redeployment
24-36 months: Remarketing
36+ months: Donation, Parts Reuse, or Scrap

We would update and modify these guidelines. Notably, remarketing can remain an
option for ordinary equipment up to 78 months old (6.5 years) at the present. SAMR
recommends remarketing after a 3-year, 4-year, or 5-year usage cycle completes.

                                   Remarketing Window


                   78                                                    6.5 years old
                   72

                   60                                                               5 year refresh
          months




                   48                                                               4 year refresh

                   36                                                               3 year refresh

                   24

                   12



                             Previous                            SAMR
                            suggestion                      Asset Disposition




10
     Gartner, Inc. “PC Disposal Cost Update 2005: Mitigating Risks.” November 2005
11
     Gartner, Inc. “Creating a Process for PC Disposal.” Flow chart, page 4. February 2006


Supreme Asset Management & Recovery                                           www.SAMRecovery.com
Plain CRT monitors have limited value. There is a market overseas for working CRT
monitors converted to televisions, which have a lower resolution. While small,
refurbished televisions are not in demand in America, they are more acceptable to
consumers overseas. Nevertheless, the care which must be taken and the shipping means
that most plain CRTs in America have 0 or negative value, and should be recycled. Some
flat panel CRT monitors and many LCD monitors have some resale value.

Lower end Pentium 3 computers, and computers below the Pentium 3 level (computers 8
or more years old, released in 1999 and before) have negligible or negative remarketing
value in America. Many charities and not-for-profit institutions refuse to take lower level
Pentium 3 computers, or will only accept Pentium 3 computers when bundled with
software licenses or cash donations covering the cost of software licenses. There exist
active markets in the developing world for Pentium 3 computers and below, but the
prices are low and the remarketing value is typically negative after transportation and
other costs.

Pentium 4 computers (released November 2000) retain remarketing value, although this
is under $100 for complete systems with 1.4 GHz processors. While the retained value is
a small percentage of the original list price, it is enough to offset the cost of data security,
removal, and other costs. Pentium 4 computers from 2000 are still assets which will
return positive value in the SAMR Asset Disposition program. Because of our
efficiencies with integrated removal and transportation services, the SAMR remarketing
value of any complete Pentium 4 computer is greater than the costs of data security,
transportation, refurbishing, etc.

Laptop computers and servers with less powerful processors retain remarketing value.
Pentium 3 laptops retain some value. However, since laptops are often produced with a
weaker processor than a desktop, this may not mean that laptops are expected to retain
value longer. Further, laptop components are not designed to last as long as desktops, so
it is harder to plan to recapture value from laptops.

Internal remarketing, selling to employees, can be considered by many companies.
Computers with no external remarketing value may still be valued by the employees who
have used them. However, this value may be eliminated when proper data security
measures are used. Wiping the hard drive of sensitive company data may break the
connection between the employee and the computer.

Maximizing remarketing sale value is a skilled process requiring a supply/market of spare
parts, a thorough knowledge of the current prices in several markets, and an established
reputation and policy for dealing with returns and equipment which is nonfunctioning on
arrival. Optimal remarketing requires judging which upgrades to make which
components to separate to maximize the net value.

Weighing against the remarketing value are the costs of reverse logistics, transportation,
identification of equipment, tracking, and other end-of-life services. Efficiency in these
areas is required for returning value on older end-of-life assets.



Supreme Asset Management & Recovery                                         1-866-509-SAMR
SAMR has its own transportation fleet and efficient reverse logistics teams. These allow
us to remove and transport computers efficiently and conveniently. We minimize the
costs of work flow disruption by working on nights and weekends, if requested. We have
experience with several remarketing channels for working computers, both domestic and
international. This allows us to refurbish and remarket computers rapidly while
recapturing maximum value.


Depreciation and Storage
Companies often make the mistake of storing end-of-life computers when they have not
chosen an end-of-life policy or found an appropriate end-of-life service provider. An IDC
study12 found that companies typically store computers for 36 months, incurring soft
storage costs of $10/month, before paying over $200 to get rid of the now obsolete
computers. IDC estimated that companies waste over $250 of remarketing value per
computer. Storing computers converts systems with 25% or more of their initial value to
pure liabilities. The cost of the lost remarketing value alone of 1 year of storage can be
half of the residual value or more.




12
     Reported by Dan Neel. “Costly computer casualties.” Infoworld. April 7, 2000


Supreme Asset Management & Recovery                                          www.SAMRecovery.com
Environmental Considerations
There is a growing awareness13 that computer disposal poses significant environmental
concerns. This is reflected by recent and pending legislation at the state level, in Europe,
and in Japan regulating electronic waste (e-waste).

Computers and electronic equipment contain toxic heavy metals (lead, mercury,
cadmium, among others) and toxic chemicals (brominated flame retardants,
polychlorinated biphenyls (PCBs), and hexavalent chromium). Heavy metals cause
developmental problems and neurological damage, particularly in infants and children,
while many of the chemicals are direct carcinogens or produce carcinogens when handled
improperly. Monitors, CPUs, and peripherals (keyboard, mouse, etc.) all fail the standard
TCLP test for leaching heavy metals.14

CRT monitors (which contain large quantities of lead) and some other computer
components are classified as universal waste in some states, a designation for some types
of hazardous waste which encourages recycling by decreasing the restrictions on storing
and recycling computers, despite their hazardous materials.

Proper recycling of complicated e-waste requires environmental engineering experience
and investments in advanced technologies. Recycling is a challenge even in developed
countries. Developing countries are not prepared to separate and handle materials safely,
and e-waste sent to less developed countries will not be recycled responsibly.
Environmental groups have suggested that sending computers to less developed countries
for improper recycling may be even worse for the environment than illegal dumping.15

The 1989 Basel Convention on the Control of Transboundary Movements of Hazardous
Wastes and Their Disposal (signed but not ratified by the US) bans the transportation of
hazardous waste (including computer waste) from developed to less developed countries,
even for the purpose of recycling. Many countries including China and India forbid
imports of computer waste. Unfortunately, the continued reality13, 15 is that many
computers are sent to China, India, and Africa anyway, in violation of the law and the
stated policies of many of the source companies and “recyclers” involved. There have
been a series of environmentalist exposes and news reports detailing the resulting
environmental eyesores, where uneducated workers are exposed to appallingly unsafe
conditions as they attempt to extract some useful metals by, for example, roasting toxic
circuit boards over open fires. These produce health problems for the uninformed
workers, contaminate air, soil, and drinking water supplies, and cause embarrassment for
the companies whose computers are still identifiable as contributing to this problem, and
are mentioned in news stories and reports on the problem.


13
   Smith, Sonnenfeld, and Pellow (Eds.). Challenging the Chip. 2006
14
   Yadong Li et al. “TCLP Heavy Metal Leaching of Personal Computer Components.” Journal of
Environmental Engineering, April 2006
15
   Basel Action Network et al. Exporting Harm: The High Tech Trashing of Asia. 2002


Supreme Asset Management & Recovery                                            1-866-509-SAMR
Failure to choose a responsible recycling partner can not only lead to embarrassment, it
can also lead to legal liability. According to the US EPA,16 “Large generators of used
electronics, such as businesses whose employees use computers … could potentially have
a waste problem on their hands in the event that their e-waste is not appropriately handled
and recycled or disposed of. … [They] have to be aware of their liability under
Superfund.”

Irresponsible recyclers may rigorously test your end-of-life data security policy. Unwiped
sensitive data is more likely to be found and exploited when the hard drives are sent to
Nigeria,17 where rings of criminals focus on identity theft using unwiped hard drives from
the United States and Great Britain.

Supreme Asset Management & Recovery has integrated American recovery processes
such as Supreme Computer & Electronic Recycling, founded 15 years ago, and Ecoglass
Recycling, which processes the leaded glass in CRT monitors and televisions to produce
raw materials for new CRTs. We are committed to a 100% no landfill policy, and can
recycle “anything with a plug.” We do the demanufacturing and recycling ourselves,
complying with American environmental laws and regulations, rather than relying on a
3rd party recycler who is difficult to audit, and who may be engaged in sham recycling.
We maintain permits from the EPA and state agencies necessary to recycle e-waste
ourselves. We issue certificates of recycling and indemnify our customers against
environmental liability.




16
   U.S. Environmental Protection Agency. “An Assessment of Good Current Practices For Recycling of
Hazardous Secondary Materials.” November 2006
17
   BBC. “UK bank details sold in Nigeria.” August 14th, 2006


Supreme Asset Management & Recovery                                     www.SAMRecovery.com
TCO Analysis
Total Cost of Ownership (TCO) is a perspective, not a specific method. Direct hardware
and software expenditures are just part of the cost of using a computer, but TCO
represents the other costs such as IT support and training. Typical TCO analyses include
the quantifiable costs of installation, maintenance, security, user training, help desk time,
and warranties. Proper consideration of end-of-life liabilities and credits must be used for
a TCO analysis to represent all relevant costs.

Using asset disposition services which return value on end-of-life assets decreases the
TCO, but not uniformly. Some procurement options benefit more than others. We briefly
mention the effect of efficient asset disposition on several procurement decisions.


Purchase vs. Lease
While purchasing is still much more common than leasing, leasing has become more
accepted due to many factors. One is improvements in terms of leases. Another is that
many leases include end-of-life services which reduce liabilities and include the ability to
return the computer system at end-of-lease. If you view the computer as a net liability at
the end of the lease term, this is a benefit. However, the remarketing value of leased
equipment which is 3-4 years old exceeds the cost of data security and transportation. An
efficient asset disposition service can provide a positive net return on computers which
are 3-4 years old. Owning the equipment at the end of the period of a typical lease should
be viewed as a benefit. The return from remarketing decreases the TCO of purchasing
relative to leasing.


Thick Client Systems
Similarly, when considering whether to purchase a more powerful system which will
retain more remarketing value, the true hardware cost is not the price, but the difference
between the price and the retained value at end-of-life. Anticipated remarketing value
provides a significant discount when purchasing more powerful systems.


LCD vs. CRT monitors
TCO considerations strongly argue for purchases of LCD monitors rather than CRT
monitors (relative to the nominal prices). LCD monitors are significantly lighter, hence
are easier and faster to install, remove, and transport at end-of-life. LCD monitors require
less electricity, resulting in power savings which may be $20/year,18 magnified by the
cost of air conditioning. LCD monitors have a longer working life, and as long as they
function, they retain a significant amount of remarketing value. Even higher quality CRT
monitors have minimal residual value, and require more disposal care.

18
     ViewSonic. http://www.viewsonic.com/monitoruniversity/lcd.htm


Supreme Asset Management & Recovery                                       1-866-509-SAMR
Refresh Cycle Length
Given the TCO of a 3 year refresh plan, would a 4 year refresh plan decrease, or increase
the annual TCO? The average TCO rises if the cost of the 4th year is greater than the
average cost in the first 3 years, and it falls if the TCO is lower. Some analyses have
suggested that this is a close decision. However, the added costs of the 4th year do not just
include the maintenance and support costs factored into typical TCO calculations. They
also include the lost remarketing value due to depreciation and breakage during the 4th
year. These often overlooked factors decrease the cost of a 3 year refresh plan relative to
a 4 year refresh plan.

While it is easy to focus on the quantifiable costs used in a TCO analysis, many
important factors are hard to quantify, but should be part of the purchasing decision.
Specifically, the lost productivity from using older computers (increased time to perform
similar tasks, particularly while multitasking, plus the inability to interface with newer
software) is only partially represented by measures of increased down time. If a 3 year
refresh policy has the same annual TCO as a 5 year refresh policy, it is clearly right to
use a 3 year refresh policy due to the improved productivity of avoiding use of equipment
which is 4 or more years old. The productivity factor alone is enough for some IT
departments to use a refresh cycle shorter than 3 years internally, despite the greater
TCO. Another factor not quantified in the TCO is the flexibility advantage owning
equipment has over leasing with a fixed return schedule.

We believe the analyses showing a similar average annual TCO for 3 year and 4 year
refresh plans are actually strong arguments for using at most a 3 year refresh plan.
Quantifying either the remarketing value from an asset disposition program or the lost
productivity from equipment in its 4th year will tip the balance toward a shorter refresh
cycle.


The liabilities from failure to wipe sensitive data, failure to comply with privacy or
hazardous waste regulations, or the potential embarrassment and liability from
participation in sham recycling are difficult to quantify. Within a TCO analysis, you can
either speculate on the cost per incident from damaged relationships and direct fines and
guess the probability of exposure, or restrict comparisons to services such as SAMR
Asset Disposition which address, eliminate, and indemnify against these risks.




Supreme Asset Management & Recovery                               www.SAMRecovery.com
Summary
End-of-life computers represent both liabilities and assets.

Liabilities:
Data security is required. Sensitive data must be securely wiped, not formatted.
The financial cost and time required for removal, transportation, and storage.
Environmental burdens because computers are regulated hazardous waste.

Assets:
Remarketing value can extend into the seventh year, far longer than many past estimates,
when you choose an efficient remarketer with integrated removal, transportation, and
recycling capabilities.

SAMR recommends:

   •   Use a military-grade wipe to sanitize all hard drives. Avoid formatting. Verify
       service providers’ data destruction policies.
   •   Recapture value by remarketing. Avoid wasting remarketing value through end-
       of-life storage.
   •   Choose a qualified, permitted American recycler. Avoid illegal dumping and
       sham recycling.


Supreme Asset Management & Recovery recommends using a responsible, accountable
asset disposition service so that your assets stay assets. Efficient asset disposition gives
you data security, convenient removal, protection from environmental liability, full
reporting, and money back. SAMR recommends SAMR Asset Disposition.




Supreme Asset Management & Recovery                                        1-866-509-SAMR
For more information on Supreme Asset Management & Recovery’s
IT Asset Disposition services, please contact us.

Web:
http://www.samrecovery.com/services/asset_disposition.html

Toll free:
1 866 509-SAMR (1 866 509-7267)

E-mail:
cmcfadden@samrecovery.com
Charlie McFadden
Vice President of Business Development

At the Gartner IT & Software Asset Management Summit 2007:
Premier Sponsor
Booth 2
Solution Provider and Sponsor Case Study Session
Monday, June 4th 1:30-2:30 Room Tennessee C




Supreme Asset Management & Recovery              www.SAMRecovery.com

								
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