Trend spotting

Features - ITAD Industry Trends

A look at the trends shaping ITAD and electronics recycling.

Subscribe
March 8, 2016

© Zelenenka | Dreamstime.com

Those on both sides of the e-scrap business—the companies providing services and the customers generating the material—dealt with significant change in 2015. What to expect moving forward is a source of debate that affects the economic feasibility of the ITAD (information technology asset disposition) vendors. What trends can we anticipate from customers and in the services requested for end of life?

As subject matter experts for the International Association of Information Technology Asset Managers (IAITAM), my colleagues and I talk to thousands of ITAD customers and also have the opportunity to work with numerous e-scrap vendors. From our viewpoint, not all of the trends are as clear as we would like.

THE MUTATING BUSINESS MODEL

The easy days of having our e-scrap accepted for free are gone. And, yet, while certifying hardware asset managers and ITAD professionals in 2015, the customer side seemed unaware of the economic situation that was driving prices up and leading some vendors to close their doors. That has changed, according to Jeff Datkuliak, vice president of corporate development for the ARCOA Group, headquartered in Waukegan, Illinois, who points to the evidence in front of customers on the business pages.

“Customers are becoming aware of the fact that lower commodity values are affecting the return they see on assets. There have been many companies that used to take electronics away for free and profited solely on the recovered scrap value, most of which are out of business or changed to a fee-based structure. This has raised awareness of the true costs to properly managed retired assets, and customers are realizing that a free program is not realistic in today’s environment. Ultimately, this will help raise the focus of documented end-of-life processes, delivering secure data management and environmental responsibility.”

THE CHANGING PORTFOLIO OF ASSETS

Another aspect feeding into business model alterations is the change in the types of assets that organizations are maintaining.

Arman Sadeghi, CEO of All Green Recycling, headquartered in Tustin, California, explains that the expected move away from desktops is affecting the mix of devices at end of life. “Over the last 36 months, we have seen the number of desktops and servers decrease, while the numbers of tablets and other small devices have increased.”

Datkuliak confirms that point, adding that the change in supply is more complex than simply deducting desktops at a constant rate. “Desktop life cycles have been extended and are commonly used until not working. Four to six years is not uncommon,” he says.

As we learned the hard way in 2008, the survivors of economic downturns are those that innovate and invest despite the harsher odds on being successful.

Jeremy Olson, corporate sales manager at Dynamic Recycling, headquartered in Onalaska, Wisconsin, says he hasn’t noticed a drop in desktops but points out that now “our customers have varying refresh cycles and IT infrastructure based on the industry and budgets.”

Keeping IT devices longer and perhaps until they fail affects refurbish and reuse opportunities reminiscent of the beginning of the end for CRT (cathode ray tube) devices.

However, no one is expecting desktops to fall out of the portfolio of assets in the near term.

Students in IAITAM courses report that, in most cases, the smaller computing devices are in addition to desktop devices rather than replacing them.

According to an informal survey of students and IAITAM members, the number of IT asset management professionals who are now managing a mobile device program as well as their previous “normal” set of asset types has leaped in the last year. With the BYOD (bring your own device) alternative, organizations demurred at first because of general security concerns or specifically over reluctance to add nonorganizational devices in the environment. According to the information gathered by IAITAM instructors in 2015, BYOD programs are growing in popularity. If that trend continues, a smaller volume of mobile devices may be sent from organizational customers to ITAD vendors than anticipated. With BYOD, the organization doesn’t necessarily ensure that the devices are properly dispatched through their ITAD vendor, only that the data is wiped from the device as well as from cloud storage.

Subject matter expert (SME) and instructor Larry Shoup of IAITAM points out another change in the devices flowing to ITAD vendors. “I see a greater awareness of the need to manage disposal for non-IT devices that might contain private data,” Shoup says.

He adds, “Medical providers have recognized this for a long time. Caching data in network devices to increase performance and the Internet of things (IoT) are some of the drivers for this trend.”

The question seems to be how long it will take IoT to reach sufficient proportions to affect the volume of e-scrap, which is a guessing game at this point.

Fellow IAITAM SME and instructor Lynne Weiss expresses some concerns about newer kinds of technology and their looming final disposition. “The students report that typically they are just beginning to look at what issues there might be. So far, they have permitted their ISPs (Internet service providers) or vendors to take care of devices without anyone in the organization being concerned about what’s on them. This is very different from what they do with more conventional assets.”

That thought certainly raises concerns about security issues.

SECURITY IN ITAD SERVICES

It has been at least three years since students began showing up in IAITAM classes because of governance requirements. Executive interest (including budget and staffing concerns) was spurred by governance demands ranging from privacy preservation through accurate inventory and controls. The entire internal disposal process was suddenly under the microscope.

According to ITAM professionals, this focus led executives to push for destruction of hard drives and sometimes total destruction of the device instead of removing and destroying the drive alone.

The vendor view from Olson verifies the issue. “We see that destruction (shredding) of data-bearing devices is almost always a requirement to satisfy data security initiatives.”

Sadeghi also confirms the trend, adding, “We have certainly seen an increase in the number of firms choosing destruction over reuse for various reasons, including data security, but also for other factors.”

When addressing customer understanding of the current market, Sadeghi brings up a disturbing trend that contradicts the IAITAM expectation that additional revenue should be expected from security services. “While most customers seem to understand the current market and are open to working with us to ensure that data security and environmental stewardship are always a priority, others have been more inclined to lower their security and environmental standards in order to maximize returns by choosing other providers,” he says.

However, Sadeghi says he does not expect security demands to continue to be lowered. In fact, he says, “This year, we expect to see a much bigger focus on data security.”

IAITAM SME and instructor Keith Rupnik agrees with Sadeghi and is convinced that even where security efforts already have led customers to use more ITAD vendor services, opportunity remains. “What I’ve been hearing is that more organizations are having their ITAD vendors do the storage device destruction, usually on-site. But I’m not convinced that the organizations have the appropriate controls in place to monitor the destruction let alone the data for an audit trail. I have the same concerns where the organization allows the equipment to be transported in what they are convinced is a ‘secure’ manner.”

He adds, “In follow-up discussions with them, I have my doubts about adequate governance information.”

WHAT ABOUT THE ENVIRONMENT?

Unfortunately, ITAM professionals are concerned that less emphasis will be placed on environmental aspects and that a simpler set of criteria will be used, such as, “How much is this going to cost me and why?” The concern is that cost factors will become a priority especially as the changing business model for ITAD isn’t going to change back any time soon.

Others share our concerns. Sadeghi has a balanced view, stating, “For some customers, we have certainly observed a decrease in the commitment to environmental standards and stewardship, while others are still as focused as ever.”

Keeping IT devices longer and perhaps until they fail affects refurbish and reuse opportunities reminiscent of the beginning of the end for CRT (cathode ray tube) devices.

When Datkuliak discusses the question of whether total destruction for security reasons is increasing, he sets the premise that it is of course the most responsible process to identify reuse first and then recycle/destroy second. He says, “As we move into an economic downturn, companies will stretch their life cycles of assets, thereby reducing reuse opportunities and values. I don’t think the executive interest will change other than getting the fullest useful life from their assets.”

Datkuliak says he feels that environmental issues actually are more visible now. “With many small ITAD service providers disappearing, the visibility into recycling and discussions on why there are charges and where does the material ultimately go have become more common.”

He adds, “Many of our customers have budgeted in 2016 for costs of disposition services as they realize the service will require dollars to manage.”

PLANNING AHEAD

Weighing these trends against one another and transforming them into a business plan for 2016 and beyond is going to be a challenge. There definitely is continued opportunity considering the large volume of assets that will be leaving organizations in the next year. With the current economic situation, it appears as if we are going to rely on the ingenuity of the e-scrap industry to find methods of reuse and recycling that are sufficiently cost effective and that build on the environmental improvements that have been made.

Datkuliak gets right to the point for his company regarding this subject, saying, “The biggest challenge for us will be the continued depression of commodity scrap prices and the potential decline of disposition services as companies reduce budgets and stretch useful life of assets. This is consistent with a general economic recession, which we are well prepared for.”

Customers and vendors alike would like to see a healthy market for the refurbishment of laptops, tablets and mobile devices, as Sadeghi predicts for his company’s future, along with a greater focus on data security. In other good news, Olson points to the economic feasibility of otherwise orphaned e-scrap in the future for his company. “We have been able to acquire the assets of a few of our past competitors who are no longer in business, he says. “Additionally, with our multifaceted service approach, we see no issues in continuing to accept IT hardware regardless of its age, type and resale value.”

As we learned the hard way in 2008, the companies that survive economic downturns are those that innovate and invest despite the harsher odds against being successful. In our favor is the truth in the statement that cleaning up after an e-scrap disaster is a ridiculously costly path to intentionally choose instead of selecting the services offered of certified ITAD vendors.

Jenny Schuchert is content director for the International Association of IT Asset Managers (IAITAM, http://iaitam.org), based in Canton, Ohio, and is an instructor and subject matter expert for IAITAM’s certification programs.