Featured articles

Planning ahead and leasing can reduce the risks and expense of discarding used equipment.

The burgeoning problem of e-waste, generated by discarded high-tech equipment, is a source of growing concern among corporate enterprises, governments, environmental groups and IT industry thought-leaders. Many companies have paid a high price in terms of regulatory fines, bad publicity and even litigation when their PCs turned up in landfills or third-world countries. 

Of grave concern as well are data security issues. In recent years, news stories have turned up fairly regularly about erased hard drives that weren’t. The results, of course, were alarming and/or embarrassing security breaches.

Consequently, the industry is on the brink of a paradigm shift with respect to asset recovery – from cost-avoidance to risk-avoidance. Thought leaders and progressive companies are seeing asset recovery less as an unwelcome cost and more as a value-added service, necessary to avoid serious risks.

Environmental risk

With their high concentration of lead (three to nine pounds in a typical CRT monitor), plus a witches’ brew of mercury, cadmium, beryllium, plastics, flame retardants and other potentially toxic compounds, PCs can contaminate the air and groundwater and expose people to carcinogens and other toxins when the equipment is shredded, burned or sent to a landfill. 

Many industry experts agree, the biggest expense associated with PC disposal is the cost of disposing of it improperly – some companies have paid as much as $200,000 in fines.  One company paid a cut rate of $3 each to remove 3,000 monitors. Three months later, the Department of Environmental Protection called to ask why the company’s monitors were found in a field.  In addition to paying to clean up the site, the company was charged another $7 per monitor for proper disposal.

Security issues

Examples of security issues abound. Earlier this year, a pair of MIT graduates published a study in which, over two years, they bought 158 used hard drives at second-hand computer stores and on eBay; on 69 drives they found recoverable files, including medical correspondence, credit card numbers and a year’s worth of transactions from an Illinois ATM.

Listed for sale on eBay last year, two discarded Bank of Montreal computers were found to contain customer account numbers and balances. The $15 eBay purchase of a former Morgan Stanley vice president’s old Blackberry yielded a company directory and confidential e-mails. Kentucky state auditors randomly checked a state agency computer – part of a consignment lot of used equipment destined for public sale – and discovered confidential files that named thousands of people with AIDS and other sexually transmitted diseases. 

Clearly, improper disposal of IT assets poses huge security risks. Improper data protection can actually be more expensive than the actual cost of disposition. In many industrialized countries, data protection is legally regulated, particularly in such sectors as health and finance.

Lost opportunity

Yet another potentially costly risk is the lost opportunity to recover the value of a company’s retired IT equipment. High-tech equipment loses value quickly. Left forgotten on closet shelves or in a warehouse, old PCs gather dust and incur storage costs when instead they could return cash to company coffers or credit toward replacement solutions. And, of course, they ultimately become e-waste and incur the additional costs of proper disposition.

E-waste flood

The global flood of e-waste shows no signs of abating. In the United States, electronic waste (e.g., televisions, computers, VCRs, cellular phones) already constitutes 2 percent to 5 percent of the municipal solid waste stream and is growing rapidly. In Europe, studies estimate that the volume of electronic waste is rising by 3 percent to 5 percent per year – almost three times faster than the municipal waste stream.

According to the International Association of Electronics Recyclers, about one billion units of computer equipment will become potential scrap between now and 2010.

Experts believe the bulk of U.S. e-waste hasn’t gone anywhere yet, except into storage – many IT organizations simply don’t have the time or resources to deal with it, so they avoid the problem by warehousing old equipment.  However, this temporary solution will only grow more costly over time, as the equipment’s value declines and the costs of storage and disposal escalate.  A small amount has been donated to schools or charities – but with the decline in prices of new PCs, few schools and charities are willing to accept older equipment.

Impact in Asia

Environmentalists are concerned that used IT equipment is going out the back door, to local recyclers who may eventually sell it as mixed scrap to wholesale brokers downstream, who in turn may export equipment or components to other countries, mainly in Asia.

The impact of that disposal practice was brought to light in 2002 when two activist groups released a controversial report that featured the farming village of Guiyu in Guangdong Province, China. Since 1995, Guiyu has become a booming e-waste processing center with tens of thousands of poor and migrant workers – men, women and children – who use primitive and potentially hazardous methods to extract metals for recycling. Most of the e-waste found there was from North America, with smaller amounts from Japan, South Korea and Europe.  The water, soil and air in the Guiyu area were intensely polluted.

Although exporting e-waste is not illegal in the U.S., Guiyu photographs displayed asset tags of public and private U.S. organizations that previously owned the equipment – clearly demonstrating the high cost of such a practice to a company’s brand and reputation.

Part of TCO

So, what to do? 

The simple answer is, plan ahead and use reputable vendors who can properly manage your total risk. Think of disposal costs as part of your asset’s total cost of ownership, and minimize the associated environmental, data security and opportunity risks by planning for disposition from the start.

“If you’re acquiring new equipment, include specific terms for the disposal of existing IT assets as part of your requests for proposals,” says Gerri Gold, vice president of corporate development at HP Financial Services.  “Also think about when and how you will retire the new equipment – and integrate all of those considerations in a total solution.”

A total-cost-of-ownership analysis is one reason why companies choose to lease.  With leasing, companies have the option to send their assets back to the lessor at the end of the lease term, eliminating the risks and costs of asset disposition.

Some leasing solutions enable you to address the digital discards in your closet or warehouse up front.  HP Financial Services will structure a lease which includes removal of any manufacturer’s IT equipment that no longer meets your needs, along with packing and shipping services, all bundled into the lease price, for a total end-to-end solution that ensures there are no surprise costs at the end of your lease.

“At one of our global Technology Renewal Centers, our engineers audit and evaluate the equipment,” Gold explains. “If it meets certain requirements, we may offer to pay you cash or give you credit for those assets. Our goal is to obtain the highest-possible return for our customers.” Take CROSSMARK, Inc., for example. The company uses technology as an "efficiency enabler" to better serve its clients and to improve its business processes. This commitment requires the company to displace hundreds of computers each year. "We quickly realized that effective asset recovery was essential for refreshing our technology and delivering on our promise of unparalleled execution," says Charlie Orndorff, Vice President of Infrastructure Services. "We needed a plan that was cost-effective and easy to implement. That's why we turned to an industry leader like HP." The company is working with HP Financial Services on a program that minimizes its environmental and data security risk, while recovering as much value from the used equipment as possible.

Carefully evaluate your opportunity to recover the full value of your IT investment. Although a PC may have no value on the company books after year three, if you just give it away or throw it away, you’re throwing away money. “It’s important for you to recapture all the remaining value of that asset,” Gold says, “because that will improve your return on your initial IT investment.”

Similarly, if you keep the asset on your books much beyond year three, your return diminishes. “Some companies today are holding onto their IT equipment longer,” she says, “but the inherent value of the assets decreases daily, while the cost of maintaining it increases. When you have older equipment, just like an older car, it breaks down more frequently, so you have more calls going to the help desk, and the help desk gets tied up supporting older technology.”

Perform due diligence

Experts recommend that you perform due diligence on how your disposal vendor handles data security and environmental compliance issues. As part of its asset recovery process, for example, HP Financial Services removes customer identification tags and wipes proprietary data from the hard drives using industry standard software – completely overwriting the data.

Find out how your vendor manages environmental compliance and ask for a fully documented audit trail that shows what happened to each asset through final disposition, whether it was sold, recycled or destroyed.

If equipment has truly outlived its technological and economic life, HP Financial Services’ process separates non-marketable materials into commodities that can are recycled or managed through the company’s approved hazardous materials controls, in accordance with environmental laws. Neither HP Financial Services nor any of its downstream disposition vendors exports e-waste outside of North America.

Ultimately, environmentally responsible equipment disposal and appropriate data sanitization and security are an enterprise’s responsibility, and enterprises should develop guidelines to ensure that e-waste regulations are followed and data security is not compromised.

In other words, if you own IT equipment, you’re responsible for where that equipment ultimately ends up – even if you outsource the disposition to a vendor.  At the very least, if you outsource disposition, be certain you choose a reliable vendor.  Better yet, lease the equipment – and let the equipment owner (the lessor) bear the risks.

“Above all,” Gold advises, “keep in mind that you need to look beyond the acquisition cost of your hardware and consider how you’re going to manage that equipment over its life cycle – including, perhaps most importantly, its eventual disposition. Only by doing that will you realize the full value of the asset – and the lowest real total cost of ownership.”