Hardware Recycling: Making money from green
Dealing with end-of-life hardware can be a burden for it consultants, but managing recycling and trade-ins for clients provides a business opportunity, as well as a chance to help the environment.
Each time a customer upgrades their IT hardware, it raises the question of how to dispose of the old equipment.
Increasingly tight regulations govern the disposal and processing of electronic equipment. A few years ago, it might have been acceptable to leave old hardware out for the local council to collect with the refuse. That is no longer the case: most councils will only collect used IT and other kit from businesses, if it is arranged – and usually paid for – in advance. The penalties for dumping controlled waste such as electronic equipment, rather than arranging collection or taking it to an approved recycling facility, are severe.
At the same time, the scale of the problem posed by redundant or end-of-life hardware is significant. IBM, for example, calculates that it took back 42,300 tonnes of end-of-life equipment and waste last year. Perhaps surprisingly, just 0.6% of that material ended up in landfill.
The changes in attitudes to recycling are being driven by legislation, especially the EU’s Waste Electrical and Electronic Equipment, or WEEE, directive. This puts an obligation on manufacturers to “take back” end-of-life or surplus equipment, and to dispose of it responsibly. There is also little doubt that end users of IT equipment have become much more aware of their environmental responsibilities, and want to dispose of equipment in a way that is as ‘green’ as possible.
This, though, presents challenges for IT consultants and resellers. As a direct result of the WEEE directive, equipment manufacturers have stepped up their take back and disposal programmes. As the directive requires, these ‘producers’ bear the cost of recycling, providing the services free of charge to end users, including businesses.
This limits the scope for IT resellers to offer recycling services at a cost to customers; clients will be unwilling to pay for a service that the hardware manufacturers provide for free. And as soon as a reseller or consultant takes possession of end-of-life equipment, it becomes their responsibility - but none of the mainstream IT hardware manufacturers provide direct financial incentives or compensation for resellers who organise take back or recycling (see table).
The picture is made more complicated still because the large manufacturers of IT equipment have take back and recycling schemes that go beyond the legal obligations placed upon them by the EU directives.
Most manufacturers, for example, will take back equipment from other vendors, as long as the customer is buying their hardware. Some will take back peripherals and other equipment, even when customers are not ordering any similar hardware replacements.
Managing the take-back process
Some clients will, of course, be willing to pay a consultant to manage recycling of equipment, especially if they have a range of different hardware from different manufacturers.
For some projects, an IT consultant will be able to absorb the cost of managing disposals and take back because they are installing new hardware for customers. It might even be the case that a client will insist that help with such services is part of the deal. With hardware sales and integration margins already thin, though, this will be a challenge for many resellers.
You can still build a viable business model, however, where there is some residual value in the equipment that a client no longer needs. Although the IT hardware vendors put a lot of emphasis on the responsible disposal and recycling of IT hardware, the fact is that it makes more financial and environmental sense for equipment to be reused.
Hardware equipment makers mostly operate refurbishment and remanufacturing operations alongside their recycling operations. Remanufactured equipment often finds its way to secondary markets such as Eastern Europe or even further afield.
Some hardware is sold on through businesses specialising in selling older or end of line equipment online, or through retail stores in the UK.
Increasingly, good-quality used hardware is being resold through OEMs and their partners in markets such as the UK, as remanufactured or refurbished lines (see Should I sell remanufactured hardware?)
There is a further incentive to arrange take back for refurbishment: it is one of the few areas where there is money to be make in end-of-life hardware. Large IT vendors such as IBM, through its Global Asset Recovery Services, and HP, through its trade-in programme or its financial services arm, will offer some payment for useable, used equipment that they take back. In the networking field, Cisco offers a similar scheme.
Obtaining best value for a client for end-of-life, but still useful equipment, does pose a number of challenges. Manufacturers will not always offer the best value for a particular piece of equipment, especially if it is from another OEM. Manufacturers would not share specific trade-in or take-back prices with IT EXPERT so it is hard to compare schemes. However to maximise value, you might well have to arrange take back from several vendors, which involves both time and logistical complexity.
An alternative is to use the services of an independent recycling provider. This has the advantage of providing a one-stop shop to you and your client, with the volume to maximise values across vendors.
A specialist who deals regularly in end-of-life equipment is will also have a more up-to-date view of its value, as well as being aware of any specific deals available in the marketplace, or any restrictions on equipment that can be traded in. They might also strip down equipment, removing items that are easier to sell or are in demand as spares, before sending hardware on to a recycling facility or to a manufacturer’s programme.
Third-party and aftermarket upgrades, in particular, can be worth more stripped out of a system than traded in with it. A manufacturer taking back hardware as a trade-in is unlikely to pay much or any premium for additional memory or storage on a desktop system, but items such as DRAM modules can be resold relatively easily in the IT trade.
Even with larger systems, such as servers or storage arrays, expensive in-life upgrades such as additional memory might only raise the trade in price by a few pounds, if at all, but a specialist recycler will know the market value for them. This also applies to add-ons such as tape drives, RAID controllers and HBAs and graphics adapters, as well as cards on modular routers or networking hardware, and even handsets for phone systems. If the hardware is still widely used, there will be some demand for spares.
It’s perhaps an extreme example, but some hardware will be worth more broken down into parts than as a complete system. As an example, a used third generation HP ML370 server – a typical tower form factor server for a smaller business - sells from between £60 and £150 online, or slightly more through an IT reseller offering a warranty. But online traders specialising in computer parts sell the front casing alone for £50-£60.
Few IT consultants will have the time or facilities to break down equipment to the component level and to resell it part by part, although a specialist refurbisher might well have these.
But there is another element you need to take into account, when it comes to maximising the trade in or recycling value of clients’ equipment.
The longer a client keeps redundant or end-of-life equipment on site, the less it will be worth either as a trade in, or on the open market.
“We try to educate clients that when they have made the decision to upgrade, they let us know immediately the equipment becomes available, to maximise residual values,” explains Roger Martin, managing director of Discovery Computer Services, a specialist IT recycling company. “So many companies hoard equipment for months or even years and lose out on any resale values.”
Businesses that keep old equipment “just in case”, he suggests, often end up losing out on the chance to raise cash for it and might even face paying for collection and sorting of electronic waste instead.
Adding added value services
According to Martin, larger accounts are, though, usually willing to pay for a managed recycling service, and his company works with a growing number of IT consultants and integrators who offer equipment recovery and disposal as an additional service, which also generates revenues. One area where consultants can offer real value to clients, especially those with multi-vendor IT systems, is asset surveys to establish exactly what equipment they own, and how could be disposed of.
Others will not want to pay for help with recycling, but might well want to pay for added value services such as data wiping or even the destruction of storage media, such as hard drives or tape.
Businesses in some industries, in particular health, government and financial services, will want certificates to prove that drives or other storage devices have been erased or even destroyed. Clients might also want you to manage data migration – moving files to new systems – as well as ensuring that user accounts and credentials are transferred to new hardware.
Some consultants and IT companies will be able to provide these services in house, but others might prefer to work with a specialist partner.
Using an outside partner is likely to be essential where clients need certified data destruction, in particular where systems have held customer or other personal data. Such data cleansing work needs to be managed according to strict procedures, and is best carried out by a specialist; usually a recycling provider will, in turn, pass such work on to a dedicated data wiping company that can provide a secure chain of custody and destruction certificates.
In addition, when it comes to dealing with any recycling provider, resellers and IT consultants will want to check they operate to the relevant standards, have the relevant certifications, and offer a service that is at least as good as the OEMs themselves. After all, it is both your reputation, and your customer’s, which are on the line.
Vendors' Recycling scheme
|Vendor||Scheme||Payment to resellers?||Planning tools available?||Open to other oem hardware?||Remanufactured kit available to the channel?|
|Cisco||Cisco Technology Migration Programme and Takeback and Recycle||None direct, though other revenues might be available such as leasing||Not disclosed||Yes||Yes, Cisco Certified Refurbished Equipment|
|IBM||IBM Asset Recovery Solutions||No||Customer Centre (for enterprise customers)||Yes||IBM Certified Pre-Owned Equipment and IBM’s Private Trading Exchange (IPX)|
|HP||HP Trade in or HP Financial Services for recovery, HP IT Hardware Recycling Service||Same terms as available to end customers||Not disclosed||Yes||HP Renew|
|NETAPP||NetApp Environmental Management System (EMS) with recycling operated by AER||No||Yes, via AER||Yes if replaced by NetApp||No, NetApp does not authorise remanufacture|
|TOSHIBA||Via partner Tier 1||Not disclosed||Not disclosed||Yes if ‘like for like’ replacement with Toshiba hardware||Not disclosed|
Should I sell manufactured hardware?
As well as selling new equipment, you may consider offering refurbished or remanufactured equipment alongside, or instead of, new equipment to their client base.
Schemes such as Cisco’s Certified Refurbished Equipment programme, HP’s Renew, or IBM’s Certified Pre-Owned Equipment, offer hardware that has been taken back and rebuilt by the OEM to its original standards.
Such equipment can offer god value to customers who might not need cutting edge equipment or who want to add to an existing installation with equipment of a similar age to the hardware they already own. Typically, refurbished equipment will be 20-33% cheaper than new, although sometimes there are even greater discounts.
In some cases, refurbished hardware might differ little from a current model, other than a few cosmetic marks. HP, for example, points out that equipment offered under its Renew programme might be little more than six months old.
Cisco, for its part, stresses the quality controls of its remanufacturing process. “Remanufactured products undergo proprietary, comprehensive ISO9001 and 14001 processes to return them to a like-new condition and factory specifications,” Cisco told us. “Key steps include screening for remanufacturability and counterfeit, three levels of testing, repair (as necessary), firmware and hardware engineering upgrades, software load, and reconditioning.”
But not all vendors remanufacture, or allow others to refurbish their equipment. “NetApp works very hard to maintain and protect the integrity of our products and consistently produce best-in-class products for our customers,” the storage vendor told IT EXPERT. “We do not authorise any resale of our products after use.”
The WEEE directive: your responsibilities
The EU’s WEEE directive works on the principle that the “producer pays”, meaning that manufacturers are obliged to take back equipment at the end of its life.
At the same time, business users of electronic and electrical hardware cannot simply dump surplus equipment, but have to ensure that it is disposed of properly.
However, the situation is made more complicated because there is, in effect, a two-tier system for business electrical and electronic waste. The manufacturer is obliged to take back, at its cost, equipment “put on the market” after 13 August, 2005. For older equipment, known as “historic WEEE”, the manufacturer only has to pay to recover and recycle the equipment if the customer is buying a new, equivalent item. If that is not the case, then the business bears the cost of disposal and recycling.
For equipment at the end of its life, it is the owner at that point who is legally responsible for its disposal. As an IT reseller or consultant you will not generally be held responsible unless you buy in historic WEEE, perhaps for spares or part exchange, and then send the equipment for recycling. In practice, though, it might be difficult to force customers to meet their obligations – and pay for recycling, for any equipment that you have removed from their premises.
To avoid any doubt, however, it might be best to avoid taking ownership of any end-of-life equipment, instead passing it on directly to a manufacturer, as part of their take-back scheme, or by handing the equipment to a specialist recycler.
Such companies will hold the necessary waste transfer certificates to handle WEEE properly. The certificate transfers responsibility for the waste equipment from the end user – or the reseller – to the recycling company, which will in turn issue a waste transfer note. A reseller handling WEEE directly would need to register in its own right as a waste carrier or waste broker.
If the equipment is not suitable for a take back programme, you can also point customers towards charities that take in and refurbish obsolete hardware, or even online sites such as Freecycle – but make sure there is a process in place to remove all data first. The Environment Agency’s Factsheet for Business Users of Waste Electrical and Electronic Equipment: environment-agency.gov.uk/static/documents/file41319.pdf
HP Hardware recycling resources:
HP Return and take-back programmes:
Private Trading Exchange for IBM partners:
IBM Asset disposal schemes (customer and end user information):
NetApp environmental certifications:
Volume 2, Edition 4
Storage fabrics: Build, buy or restore? feature finder code 2416a.