David Daoud Research Manager, IDC

More recently, a few leading companies have begun introducing social responsibility language that requires suppliers to revisit their own practices. Contracts now include clear legal language that reinforces the need for more social and environmental stewardship not only by the IT vendor but also among its suppliers.

Yet, these cases still are a minority practice and mainstream adoption of these practices is expected to expand going forward. In a survey IDC conducted in 2007 among North American and European companies, about one-third of participants claimed to have responsible policies incorporating environmental stewardship in their IT asset disposal (ITAD) practices.

However, additional research among these companies showed that the claims of responsible practices were just that – claims. A lot of these companies re-channel retired hardware into the donation market without sufficient scrutiny and or effective security measures. Although donation is a good practice with positive implications for the environment, it must be implemented with stringent rules that guarantee safe use and disposal afterwards.

In an interview with a major investment bank in New York, we were told that the company’s current practice is to donate PCs to charitable organizations in Africa. The process is performed directly by the IT staff, without addressing the potential problems such practices could create. Once it is shipped to Africa, there is no more visibility to the hardware and no guarantee on how it is being used.

The solution to this problem is to rely on third-party experts who will be responsible for managing the IT hardware downstream when it is retired. In mature economies, roughly 33 percent of companies utilize third-party ITAD service providers. The outsourcing of this function has been on the rise and that is good news.

However, the pace of ITAD outsourcing could increase if several issues are overcome. When discussing the issue with corporate decision makers, three primary obstacles emerge: fear of complexity, new skill requirements and cost.

Part of the problem is that the ITAD function generally is the domain of the IT department. About 77 percent of the companies surveyed indicated that the ITAD function is the responsibility of the IT staff. However, IT staffs customarily are not fully equipped to handle such activity. The perception of complexity only adds to the challenge.

While these are legitimate concerns, we believe that the solutions are less complex than perceived. To simplify the illustration, one can compare such adoption to the challenge of adopting a new food diet under doctor’s orders. Moving to leaner and healthier nutritional habits is often daunting. Yet the payoff and results come in the form of better fitness, more energy, and a leaner physique. Ultimately, even lower cost can be achieved.

Adopting a healthy ITAD disposal strategy is no different. While it may seem daunting at first, a more intelligent flow and movement of hardware, in particular in the downstream, should result in a leaner and more cost-effective operation. Utilizing the right skill sets, preferably through the hiring of the right service provider, these processes should result in good payoffs in a relatively short term.

So what is to be expected?

• Seamless flow of assets. It is critical that the proper IT lifecycle management be implemented. Establishing a clear pathway for the IT systems on how and when they will retire should result in cost savings.
• Efficient asset retirement strategy. A seamless movement of IT assets assumes the company knows how to optimally retire its hardware. Several options are available for extending the life of the systems, including intelligent redeployment and cascading, managed donation, remarketing through secondary channels, employee sales and other strategies in between. Each of these options contains cost and introduces predictability in managing total cost of ownership, while helping companies reduce their environmental footprint.

Just like a diet, these strategies can be implemented with some serious commitment from the company seeking to achieve good results. Such commitment could require substantial structural changes that are often the subject of resistance in corporate IT.

The first changes that may have to be made are organizational. In this case, we often recommend that companies challenge the way they manage their IT operations. Being an IT guru is not enough to manage the ITAD function; other areas of expertise are required, such as finance, compliance, environmental science and even procurement. Relegating ITAD to IT or adjacent functions, such as facilities management, is not good enough. So breaking organizational barriers probably is the most difficult challenge.

Another commitment is to thoroughly understand what options are available in terms of outsourcing, and the “pain points” that exist in the industry. As cited above, companies have several options for working with professional ITAD service providers, but due diligence is an obligation of the buyer.

In general, there is no single solution that meets the needs of all companies. ITAD options include elongating the life of the systems, if there is a credible business model behind such initiative, donating, remarketing or a combination of the above. What works best must be determined by the company and its service provider.

For instance, an aggressive replacement cycle may not work for all companies. If a company, or even a unit of a company, needs the latest and greatest technologies that enhance productivity and improve competitiveness, other units or companies may be less sensitive to technological changes and can afford a longer lifecycle. Some companies may show a preference to managed donation with implication on their tax liability. Others factor in the revenue they get from the remarketable assets as a way to reduce their asset retirement cost.

Again, while no single solution applies to all companies, the goals are ultimately the same: containing costs and reducing environmental footprint. With rising prices across the board, driven by higher energy and commodity costs, pressure has been mounting to reduce IT costs in general and ITAD is no exception. Any solution selected by a company and its ITAD service provider must prove to be the most cost-effective approach. Collaborative work between the company, its ITAD service provider and other third-party consultants should determine such cost versus outcome.

However, cost alone is no longer enough – the right strategy will also achieve environmental goals such as reducing carbon emissions and controlling electronic waste and toxins while monitoring trade activity to avoid wrongful exports to regions where legislation is lax.

Although progress has been made in defining the terms of engagement with the adoption of a set of rules of conduct by a few leading ITAD service providers, there is a lot that remains to be improved, in particular during the final recycling phase. While recyclers tend to promise best outcomes, their industry remains behind the curve in producing maximum recyclability.

Case in point: there has been poor adoption of the right metal separation technologies and techniques. And because IT decision makers are not fully knowledgeable on the processes, accountability in the recycling space has not yet been fully achieved. With the growing need to recycle more electronic waste, there is a chance that accountability would be sidelined as a result. But responsible companies should incorporate accountable recycling to help bring IT into a greener landscape.

IDC is currently writing a White Paper sponsored by Redemtech on IT Asset Management for Sustainable Computing to be published in September 2008.

David Daoud is Research Manager with IDC's U.S. Quarterly PC Tracker, Personal and Green IT programs. He is responsible for analyzing and forecasting the PC market. In this role, he interfaces with a large roster of PC vendors, distributors, retailers, component and software makers, and applies his market expertise to help shape forecasts related to products, customers, and channels in the U.S. market. In addition, Mr. Daoud is involved in Green IT research and how the environment is reshaping IT lifecycle, asset disposal and recovery and recycling.

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