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IT is a highly dynamic environment, with new products constantly coming to market. For organizations that want to have the best of everything, they must chase the market and accept the high cost of continuously replacing or updating their IT systems. Having the most up-to-date platform all the time doesn't always work from a cost-benefit standpoint.
The majority of organizations follow one of two IT lifecycle management models for equipment refreshes. In the first model, organizations view equipment as having a nominal lifespan, and then replace it. If the piece of equipment fails during its lifespan, they either replace it with a similar specification to avoid retro-testing existing workloads against a new infrastructure or with a newer, more powerful and energy-efficient system.
The second, more conservative model, is for those who try to sweat their assets. For example, they may have a standard model of refreshing their hardware every five years, and believe that, by extending it to seven years, they will save money.
The trouble with both approaches is that they don't reflect the needs of the business -- and this is where IT has to step up to the plate.
Track asset values with IT lifecycle management tools
IT teams should consider a continuous refresh model that can match the capabilities of IT platforms with the business' needs. However, they can't achieve this by just working from an Excel spreadsheet. The first act for any IT department is to get a better understanding of their IT platform with IT asset management tools, such as those from Kaseya, Spiceworks or LANDESK.
These systems should feed into an asset database that allows an organization to apply its own rules around asset values, maintenance schedules and end-of-life details. Remember that a brand new $5,000 server will be worth around $3,500 as soon as you open the box. Straight line depreciation is not the way to look at IT assets. The value of equipment collapses in the early days of use, and will level out around its third year, dropping far less quickly.
However, all systems will have some residual value, even if it is just for the precious metals that are contained within them. Through proper IT lifecycle management, IT teams can ensure the platform they provide to the business is the most cost-effective at all times.
In Figure 1, the blue line shows how accountants like to deal with an item -- straight line depreciation from the purchase price over a period of time. The teal line shows the actual value of the item on the open market -- it is less than its purchase price as soon as it is delivered, drops rapidly in its first year of use and then levels off. The orange line shows the value of the data that is being created, moved and stored by the system -- this grows rapidly, plateauing as the systems age and struggle to deal with the increase in data volumes. This then leaves the green line -- the value of the overall system to the business.
This value increases as the data value increases, but is offset by the decrease in the intrinsic value of the hardware. At some point, you reach a peak of business value after which the system is no longer optimally supporting the business.
This is when IT teams should replace equipment, but it will be different for each type of equipment. For example, organizations might need to replace critical data storage for transactional systems more often, as slower transactions speeds may result in a loss of customer retention in favor of a competitor who uses faster solid-state systems. Network switches may have a longer period before they hit peak value, as the technology within networks moves slower than in storage or servers.
Time to take out the trash
IT lifecycle management can also make a big difference in how IT teams manage the disposal of old equipment. The equipment will have some level of residual value, whether it is formally recycled and sold by an agent, put up on eBay or ground down and recycled for the precious metals within it. In the U.K., companies such as Bell Integration offer a full IT lifecycle management service from procurement to disposal, with the money from the resale of old equipment being offset against the costs of the service. In the U.S., Avnet offers a similar service, as do IBM, Dell and other vendors.
A key part of the asset retirement stage is to adhere to all regional and global laws. If you are in Europe, you'll need to ensure that the IT lifecycle management company you partner with is Waste Electrical and Electronic Equipment-certified. Also, make sure that they can handle the data on your equipment in the way you need. Some equipment will be fine with a deep reformat of any disks, which will result in a greater residual value of the asset. For other equipment, the storage systems will need to be removed and securely destroyed. Bell, for example, uses a macerator that leaves no particle from disk drives over 2mm. Even then, the output from secure destruction will contain those precious metals that can be recycled.
An IT department needs to sit down with the business to fully understand its needs and the value it applies to the various aspects of IT. By better understanding the organization's risk profile and data requirements, teams can put a better IT lifecycle management model in place. The resulting IT platform will always be relatively current in technology terms and the business will benefit from it. The cost of maintaining this platform is a win-win for all concerned.
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