As the IT asset disposition industry matures, market factors are pushing hard toward more asset reuse rather than commodity sales. That’s according to a report from Midwest ITAD firm Cascade Asset Management.
The third-annual report from Cascade Asset Management, an ITAD company with processing facilities in Wisconsin and Indiana, provided a breadth of statistics, figures and hard data on the industry’s growth and evolution. Among the key findings was an increase in both volume and average prices paid for resale products.
When Cascade founder and CEO Neil Peters-Michaud started the company 18 years ago, asset disposal often came as an afterthought for companies using large amounts of IT equipment. Whether it’s a natural reflection of a developing industry, or simply the increasing ubiquity of IT equipment usage, that mind-set is changing.
Now Cascade finds IT companies are thinking more and more about end-of-life care as an important element in the management of their assets. Not only is that a positive step toward ensuring data security, but it helps maximize the value that can be recovered from disposed assets.
“It’s important for us to be able to get some of the devices as soon as they’re no longer needed for their initial use,” Peters-Michaud said. The company has studied the depreciation rate for devices over time. The newer the refurbished device, the better the price.
Cascade saw markedly higher prices for secondhand electronics in 2016. The study found a “21.2 percent increase in the average price paid for laptops, desktops and mobile phones refurbished and sold” during the year.
The recycling market has contributed to this trend as well.
Scrap slips, reuse rises
E-scrap commodity prices plummeted from 2011 through 2015: The report shows drops of 36 percent for gold, 69 percent for copper and 71 percent for iron. While that has presented substantial challenges for scrappers, it has driven more growth in the reuse side of the ITAD world.
The company diverted 1.3 percent more weight from recycling to reuse in 2016 versus the previous year.
“If we can reuse those items because they still have value, that helps to really provide a whole different value equation back to enterprises,” Peters-Michaud said, “because they can get paid for working equipment rather than pennies on the dollar for scrap metals and such.”
That message is being passed on to Cascade customers with growing success: Companies surveyed for the study reported an increased interest in maximizing resale value, compared with previous years.
That’s in part due to the revenue-sharing programs employed by Cascade and other companies. Cascade negotiates a revenue-sharing percentage based on the resale price of the devices. That changes the business equation. Rather than an adversarial role where the ITAD company tries to pay as little as possible for the assets to maximize its own revenue, both parties have a shared interest in selling the product secondhand for top dollar.
Cascade calculated a net cost to process an asset of 32 cents per pound in 2016, down from 38 cents per pound a year earlier. A lot of factors impact the cost figure, but Peters-Michaud pointed to the rising returns from resale electronics as key to this trend.
Although it’s becoming easier to convey the monetary and environmental value of reuse versus scrap, one large barrier is still proving hard to surpass.
“The biggest concern from our client base is security,” Peters-Michaud said.
Cascade’s survey of customer companies, which included 77 respondents, asked them to respond to questions with answers on a scale of one to five. Asked which considerations were most important when disposing of IT assets, companies rated “managing data security and privacy risks” at a 4.68 (in last year’s study, that number was 4.74). That was well above the next highest, environmental concerns, which scored a 4.03, down from its value of 4.23 in 2015.
With changing security technology and procedures, however, keeping companies educated about what the current security standards are has been a challenge. In its report last year, Cascade featured a section dedicated to explaining why the formerly common three-pass data wipe technique used by the Department of Defense is now obsolete and has been replaced by a one-pass overwrite standard. Even so, the notion remains among some clients that the old standard is the best.
Apprehension over data security is still a hurdle holding back reuse. Some Cascade clients require all their used IT equipment to be physically destroyed to alleviate any lingering security concerns.
Peters-Michaud predicts data security will continue to be a very strong consideration for companies in the coming years, particularly with the amount of attention cyber security has garnered in the political sphere.