As my colleague Matthew Mickelson pointed out in Challenges in Data Center ITAD: IT Asset Security, data security is the #1 priority when it comes to IT asset disposition. But if data security is first, then remarketing (or asset value recovery as it is also commonly referred) is a close second, especially when it comes to data center decommissioning. This is because remarketing IT equipment can have both significant financial and environmental impacts.
After securing sensitive hard drive data, companies want to get as much money as they can for their retired IT equipment. Nearly every ITAD vendor will claim they can and will get top dollar, which is great in theory, but rarely definitive. No matter, as we have been discussing throughout this blog series, very few ITAD vendors specialize in the data center. Like all other areas of IT asset disposition, remarketing data center IT is very different from, and in some ways much more challenging than, remarketing corporate IT. So, you must be very careful to vet such “top dollar” claims when it pertains to data center decommissioning projects.
Regardless of what type of IT equipment is being remarketed, it really boils down to these three things:
- The price the IT equipment sold for and the costs of goods sold (COGS). COGS is calculated by adding the processing fees, costs to repair or upgrade equipment, and the revenue share, which is the commission percentage the ITAD vendor will keep for its remarketing services.
- The volume of IT assets moved, and the aggregate sum of this volume. A slightly higher price on 25% of the inventory is not a good outcome if the remaining 75% was not sold, especially if the fees were high, the remarketing share favored the ITAD vendor, or the sales cycle surpassed several months.
- The reusable yield on remarketed IT assets. If your products are not being remarketed, they’re being recycled resulting in money left on the table as well as long-term environmental impacts.
In this blog, we will take a closer look at both the remarketing and environmental challenges of data center decommissioning, as they go hand in hand. We’ll also shed light on how these challenges differ from corporate IT, which hopefully will help clarify why it’s so important to use a data center ITAD specialist.
Remarketing Challenges of Data Center ITAD
Data centers are unique because the asset mix is expansive, the volume of equipment is substantial, and the per-asset remarketing value is considerably higher than corporate IT. When servicing hyperscale data centers, as ITRenew does, the volume of outbound IT equipment during major IT refreshes or cluster shutdowns (which can include data center in a box facilities) can be quite substantial. The huge volume of equipment makes it challenging to remarket it at consistently-high per-asset prices within a relatively quick period of time. A major cause of this challenge is that the end-user market for used data center IT equipment is niche and thus much smaller. Unlike the marketplace for corporate IT assets such as used laptops, tablets, and cell phones, which is enormous considering it’s comprised of both consumer and commercial buyers.
For example, if you’re selling 100 used laptops, you can post them individually on various e-commerce platforms and receive a decent price. But selling millions of IT components and hundreds of thousands of high-end data center IT products worth 10 times that of a single laptop to a buyer pool 1/10,000th the size is extremely complex. Part of the complexity is the economics of supply and demand, which adversely affects the success of selling a high volume of equipment for the best price. ITAD companies that don’t understand how these economic variables affect the outcome, or ones that aren’t used to controlling the variables in the sales cycle, will have a difficult time maintaining long-term market pricing on high volumes of data center IT assets.
Not only is the total number of data center end users much smaller, large volume buyers are even more rare. As a result, it’s quite common for ITAD companies that don’t specialize in data centers to leverage the broker channel to move decommissioned hardware. In the highly fragmented broker channel, data center equipment sells for far below its potential value because it will likely be flipped several times before ultimately reaching the end user. This collection of broker channel middlemen, however large or small, represents lost margin that otherwise would have been claimed by the ITAD provider and you.
IT equipment parts harvesting is a much bigger factor in data center ITAD, too, as parts and components of data center IT have much greater value than with corporate IT. ITAD remarketing requires deep understanding of the product variables that can yield premiums, the IT asset marketplace, or established and well-trusted, channels for high volume or value data center gear. Otherwise, equipment will end up in the wrong sales channel, leaving the ITAD value unleveraged and highly volatile.
Environmental and IT Sustainability Challenges of Data Center ITAD
Because of the longer lifecycles and consumer technology demand, most decommissioned corporate IT is at its end-of-life after decommissioning. However, data center IT equipment often has considerable reusable life remaining in the crypto-currency mining, cold storage, cloud storage, and storage-as-a-service industries. ITAD companies must possess expert knowledge and systems-driven capabilities to repair, recondition, upgrade, and optimize components to maximize reuse. These qualifications also minimize the environmental impact. According to a United Nations study, technology reuse is 20 times better for the environment than recycling.
In addition, ITAD companies using data erasure tools that have a high failure rate, or are prohibitively inefficient, force customers to adopt shred-only policies for data security purposes. This practice results in destroying perfectly good hard drives that could otherwise be resold or reused, which not only reduces value recovery, but is a detriment to IT sustainability and carbon footprint. For comparison, Matt indicates in his blog that ITRenew consistently achieves about 99% data erasure yield on mass decommissioning jobs, whereas other tools consistently yield only 50-60% erasure success under similar conditions. Smaller data centers can have hundreds of thousands of hard drives in their infrastructure. So, the remarketing and environmental impact associated with data erasure success, or overall yield in general, can be quite substantial even for modest data center deployments.
While somewhat new to the ITAD marketplace, open hardware platforms such as The Open Compute Project generate large volumes of used data IT center equipment with tremendous value, but relatively low remarketability. Without reconfiguration and optimization for broader market applicability, retired high-end open data center hardware that has years of reusable life will be prematurely destined for the e-waste stream.
Through a long-standing relationship with one of the open hardware pioneers, ITRenew has access to recondition and remarket open hardware as it is decommissioned. We’ve leveraged strategic partnerships for both hardware and software to reconfigure this equipment and increase its reusability on a global scale.
Data Center ITAD Best Practices: What to Do Next
This blog wraps up the portion of our series dealing with the various challenges of data center ITAD, including the operational challenges, the IT asset security challenges, and the onsite data security challenges. It’s important to understand what makes ITAD in the data center so different and more complex, so when choosing your ITAD vendor or establishing internal ITAD directives you’re best positioned for maximizing your return, moving the most volume, and protecting against negative long-term environmental impacts.
In the next installment, we’ll get into the best operational practices for data center decommissioning. Also, later in the series, I will author a 3-part segment on best practices in data center IT remarketing, further explaining the infinite number of variables that makeup the remarketing game, and that impact the value recovery of data center IT.