Remarketing, also commonly referred to as value recovery, is a core function of data center IT asset disposition (ITAD). After protecting the massive amount of sensitive data that is stored on data center IT equipment, ITAD remarketing is the next most critical function. It’s typically what “pays the bills” for both the service customer and the ITAD service provider, with the resale proceeds used to cover the costs associated with IT asset recovery and equipment processing as well as the costs of goods. According to Gartner’s Magic Quadrant for ITAD Worldwide, in which ITRenew is recognized as a Visionary:
“Remarketing/resale is the main source of revenue for most organizations and many ITAD vendors. Indeed, it is the critical denominator in the core ITAD cost-benefit equation, and often determines whether the vendor writes the client a check or an invoice.”
Gartner is accurate in its assessment, but what’s missing from the Magic Quadrant report is a deeper analysis into the core remarketing methodologies involving typical corporate ITAD versus data center ITAD. These two ITAD service segments go together like oil and water, in that, they don’t go together.
Corporate IT equipment is generally everything that you would find in the business workplace. If you’re sitting at your desk right now reading this blog, chances are you’re viewing this on an LCD screen that is wired to a workstation with a laptop connected. To one side is your VoIP desk phone and, if you reach into your pocket or purse, you’ll probably find a company-issued cell phone. Maybe, just maybe, there is a tablet somewhere too, as if you need yet another IT device to keep track of. These IT products, in addition to general office equipment like printers, copiers, and faxes, are what we define as “corporate IT.” There’s nothing objectively complex about these IT assets as they function for relatively elementary tasks. They’re like a Toyota: dependable, easy to use, simple in design, and void of complicated matrices and moving parts.
Comparatively, data center IT equipment is everything you would find in a data center environment. This time, instead of being at your desk, let’s assume you’re at home on your laptop wanting to stream an episode of Game of Thrones. If you’re like me, you go through GoT withdrawals and can’t get enough. You log into your HBO GO account, click a few buttons, and the episode appears on your screen in crystal clear 1080p HD in a matter of seconds with little to no time needed to buffer. Seems automatic, right? Well behind the scenes exists a hugely complex networking infrastructure.
This data center networking infrastructure is made up from switches and routers, which are connected to a compute infrastructure made up from servers, which is accessing and analyzing massive amounts of data on storage systems made up from storage arrays and high-density hard drives. Compared to corporate IT, this data center infrastructure is like the newest executive-level BMW: packed with several layers of custom software, endless amounts of moving parts, and complicated protocol matrices. Should one of these fail, the entire thing comes crashing down.
In this portion of our blog series, I will outline the methodologies used in ITAD remarketing for data center IT equipment versus corporate IT equipment. Furthermore, I will demonstrate how these methodologies ultimately determine your success at maximizing Total Return on investment when choosing a data center ITAD vendor or setting up a data center ITAD program.
Since this is a fairly involved discussion, I will break it down into three installments. In the next two blogs to follow this one, I will address the laws of data center ITAD supply and demand, and then conclude with data center ITAD best practice recommendations.
Data Center IT Remarketing: Why You Should Care
The secondary market for used IT equipment is huge: estimated to be worth upwards of $1 billion. What might come as a surprise to some, however, is that it’s not made up of a large quantity of corporate IT assets, but rather data center IT assets.
Every corporation in the world needs enterprise-class IT to run, whether it’s as simple as a single switch and server or as complicated as the data centers that run Amazon Web Services (AWS), Facebook, Azure, and Google. Yet, relatively few companies have the budget to always purchase new IT equipment. Instead most augment data center IT equipment procurement with secondhand pre-qualified gear at a fraction of the price of new. But don’t assume “fraction of a price” means “cheap” when it comes to used data center IT equipment. Top tier cloud companies typically churn their data center IT every three years (at the most). Because these companies deploy the most state-of-the-art data center technology, a high percentage of it is reusable by other companies that don’t need cutting-edge technology to run their data center operation.
Accordingly, resale prices of secondhand data center IT assets far exceed those of corporate IT assets: upwards of 10 times for servers/storage and 100 times for high-end networking devices. This is the first key piece of information in maximizing your Total Return on ITAD investment.
Data Center ITAD Remarketing Strategy
Now that we know that decommissioned data center IT equipment is worth more than dispositioned corporate IT assets, let’s delve into the typical strategy of ITAD remarketing for corporate IT assets and explain why it’s a bad strategy for remarketing of data center IT.
Corporate IT assets are great for the consumer market. Very few companies will purchase large amounts of used laptops, phones, or tablets. This is simply because the technology changes so frequently that by the time they’re upgrading their infrastructure, several new iterations already exist that are better, faster, and cheaper.
Consumers, on the other hand, don’t always need the latest and greatest. Generally, consumers are fine with an “above average” to “average” performing laptop at a much cheaper price. Most frequently, ITAD companies will reach the consumer market through ecommerce sites such as eBay, Amazon, Newegg, and others. Remarketing corporate IT at wholesale and/or to emerging countries is also becoming increasingly more popular.
So, why can’t this model be used to remarket data center IT assets? Let’s go back to the earlier car analogy. Say, for example, you are purchasing a standalone Cisco switch or HP server and integrating it into your data center infrastructure without software stacks, BIOS configurations, warranty management, and parts replacements. This would be like buying a new SUV, two tablets, and a bunch of cables, and trying to install the tablets into the car headrest yourself.
Wouldn’t you rather buy these custom configurations from a trusted vendor that has the experience and know-how to install those items in your infrastructure? The same rule applies here. Buying used data center IT assets from eBay or Amazon forces the customer to configure, install software stacks, and warranty the parts themselves. This is something most are unwilling to do.
Instead, most secondary buyers would rather purchase remarketed IT equipment from a vetted supplier that has the value-added services to go along with the switch or server to ensure they remain online and in constant uptime. After all, when someone is spending $3,000 on a 10GB Cisco Nexus N3K switch or $25,000 on a Juniper 32GB line card, they want all the bells and whistles that come along with the price tag.
In next week’s blog, I’ll explain how the laws of supply and demand further differentiate data center IT remarketing from corporate IT remarketing and what to watch for when searching for a specialized ITAD solution for your data center decommissioning needs.