Companies are hanging on to their IT equipment longer to stave off spending what they can't currently afford. But IT systems have to be disposed of eventually; what happens when they do?
As one of Australia's largest companies, Westpac Banking Corporation faces a very practical technological problem: what to do with the thousands of PCs that reach the end of their three-year lifecycle every year.
Westpac's solution has been to send these systems, of which there are between 8,000 and 12,000 annually, to charity group WorkVentures. One of several organisations in Australia set up to receive and revive outdated IT inventories, WorkVentures employs nine people in its Mascot, New South Wales, facility. There, systems from Westpac and several other corporate partners are stripped to parts, then reassembled into refurbished units that are on-sold to the general public at around $299 (£163) each including an Internet starter kit, modem, and other equipment.
WorkVentures chief executive Steve Lawrence has big plans for the programme, which is selling around 400 PCs a month and is expanding nationwide through partnerships with similar organisations in rural areas and other capital cities. Lawrence's goal is to eventually employ 100 people who process 40,000 PCs nationwide every year, building up a sustainable operational model as well as helping its workforce -- largely people who were previously unemployed -- develop marketable skills.
There's not much margin in the computer refurbishment business; after all, IT equipment that's written off after a typical three-year usage cycle has no paper value and may well be all but worthless on the open market.
"If companies were replacing their equipment every two years they'd probably get a good return [by selling it into the market]," Lawrence says. "But if they're holding off for three or four years, [the residual value of] their equipment doesn't really cover the whole cost of the decommissioning process. By the time you've paid for transport and the cost of the disposal system you may use, there's often not much change left."
In May, the challenge of maintaining a financially viable computer recycling operation hit the Dell Recycling Program, a Dell-backed initiative that was launched in June 2003 and recycled 17 tonnes of computer equipment in its first six months. But Dell's partner in the venture, HMR Australia, went into receivership in May. Dell expects the program to be up and running with a new supplier within weeks, but HMR's failure highlights the economic difficulties that accompany the model.
Finding a new lease on life
Manufacturing giant Smorgon Steel has kept many of its desktop PCs for the better part of a decade. Smorgon, which has 2400 active desktops around Australia, began using thin-client technology from Citrix in 1998 in limited deployments, but now includes Citrix MetaFrame technology in its normal PC lifecycle.
"At the end of three years, if a PC is still working and the user is still happy with it, we'll leave it there. If not, we pass it down the chain to someone who doesn't need as much power." Once the computers get too old to run current operating systems, they're wiped clean and reloaded with a MetaFrame client application that lets them function as dumb terminals. Linked to an ever-growing bank of application servers, the refurbished desktops can access modern Windows applications regardless of their own computing power. A number of systems are so old that they're running the DOS Citrix client.
Using this approach, Smorgon has managed to slow down its desktop-buying cycle and stretch far more years out of its systems than would normally be anticipated. "Citrix has evolved over the years into a way we can get the most life out of a box," says Paul Simmonds, the company's infrastructure services manager.
"We'll run a PC until the cost of repair is greater than the cost of buying a thin client. At the end of three years, if a PC is still working and the user is still happy with it, we'll leave it there. If not, we pass it down the chain to someone who doesn't need as much power. Servers are the same: if we've got a high-end server that in three years' time ceases to be high end, it makes a great Citrix server."
Simmonds says nearly 95 percent of Smorgon's users are now relying on the Citrix client "in some way or another". Monitors are reused as long as they continue functioning. And on the network, Simmonds says, "the only thing we replace is the odd dead hub or router; most of the big-end stuff just seems to go on forever."
In the long term, this translates into significantly reduced IT capital costs, allowing expenditure to be funnelled away from desktop purchases into other priority areas. And once the systems are absolutely too old to do anything, Smorgon simply sends it to the company's internal recycling operations -- a normal part of the business that serves a convenient double purpose in the context of old IT gear.
Licence to reuse
For those businesses without their own inhouse recycling facility, external partners play a critical role in disposing of end-of-life gear. Many contract rubbish removalists are equipped with facilities to strip and dispose of the many different plastics and metals in electronics equipment, charging by the kilogram to remove your old gear.
In the end, paying to have equipment disposed of can cost more than it's worth. That's another reason why a clear and coherent disposal plan can keep your disposal costs down and maximise the value of your IT investment. Establishing an informal hierarchy of needs within the business highlights each user's relative needs; following this roadmap, systems can be routed from power users to mid-tier users and, eventually, low-end roles such as providing general system and Web access within an outlying depot.
Improvements in clustering technology are opening up another role for aging systems: Linux, Citrix MetaFrame Server, Windows Server, Oracle, and many other enterprise applications offer the ability to aggregate the computing power of whatever systems are available to them. This approach is a precursor to grid computing, in which computers farm out applications and contribute whatever they can to the overall computing infrastructure.
"Not all organisations have a handle on what applications they've got deployed, and where those apps are deployed." In a clustered computing setup, it doesn't matter how much or how little computing power a particular system delivers; until it becomes more expensive to power and maintain the system than it is to dispose of it, that system can make a small but important contribution.
There are, however, issues that must be considered before you refurbish yourself into a hole. Most prominent is software licensing, a hidden issue that can blow out your expenses in unforeseen ways if you don't monitor your systems carefully.
Licences are often allocated based on the specific machines they're used on. When those machines are retired or repurposed, it's critical to inventory the licences associated with the software loaded on those machines. If you simply reformat a system and reload new software on it, you could well lose any record of which licences were allocated to it; with dozens of applications often loaded onto systems over time, you could easily lose track of hundreds or thousands of valuable licences. And if that happens, the cost of your obsolete equipment will quickly shoot through the roof.
"There is a significant value attached to licences," says Phil Hare, regional manager of license monitoring tool provider Centennial Australia. "We find that not all organisations have a handle on what applications they've actually got deployed, and where those apps are physically deployed within the organisation. Inventory tracking software is becoming an inherent management tool; without the visibility to look into licenses and where they're deployed, companies are just travelling blind."
Licence management is handled competently by a variety of standalone products or as a part of broader desktop management suites. It's a good idea to have this capability installed, since monitoring actual license usage against bulk licence volumes is an excellent way to save costs -- particularly when licences are freed up as computers reach the end of their usable lives.
Microsoft weighed in on the issue in 2001, when it discovered Geelong charity PCs for Kids was loading old Windows versions onto systems destined for underprivileged children. The ensuing war of words between the two organisations fuelled establishment of MAR (Microsoft Authorised Refurbisher), a programme that helps charity refurbishers get properly licensed copies of Windows for their donated systems.
WorkVentures is a member of MAR, as are organisations such as Perth-based Technical Aid for the Disabled, whose 12 volunteers refurbish systems that are leased to disabled customers and updated regularly using spare parts from organisations such as the WA Departments of Treasury and Finance, and Local Government and Regional Development.
For most businesses, however, the protections afforded by MAR are irrelevant; the burden of licence compliance rests squarely on the shoulders of the companies doing the donating. By giving a working system to a charity, a company could well find itself in breach of volume licensing arrangements that saddle the charity with what are technically illegal applications. Similar problems could appear when companies resell old computers to their employees, whose use of Windows and other software might well not be covered by existing site licences.
This is a big problem for users of PABXs, who are abandoning their old systems in increasing numbers as VoIP continues its astronomical climb into the mainstream. Many PABX software licences are tied to a specific site; when the equipment is on-sold during a system replacement, that licence restriction means the sale is effectively for hardware only; the new user must acquire a new maintenance contract and software licence. This issue negates many of the cost advantages of buying second-hand equipment, and also slashes the potential residual value that PABX users can expect to get back from their equipment.
Anandh Maistry, managing director of network and contact centre integration firm Touchbase, says the uncertain economics of the used equipment market drive many businesses to squeeze every last bit of life out of even their telephone handsets. Units might be kept on as critical spares, reassigned as devices for R&D laboratories, or sent to small branch offices while others end up going straight to charities; Touchbase, for example, helped RACQ CareFlight outfit its call centre with surplus phones from its inventory.
However they're managed, holding onto the equipment in perpetuity also introduces storage and inventory management costs -- which companies such as Touchbase are equipped to handle, but end users might find to be higher than the actual value of the equipment. "There always seems to be another use for the equipment," says Maistry. "We work closely with clients to do technology mitigation. When it's technology that clients no longer need, there's no incentive for us to help except that it's a nice thing to do."
Aging IT gracefully
Even the best intentions, however, can easily go awry when it comes to disposing of old equipment. Many times, aged equipment is kept in a storeroom before being eventually disposed of during a spring clean. But if data on this equipment hasn't been properly wiped, confidential business or government information can easily end up in unknown hands when the equipment is snatched up at auction.
Such carelessness has resulted in embarrassment for more than a few government agencies in the past, underscoring the need to wipe hard drives clean effectively. The US Department of Defense DOD 5220.22-M standard contains generally accepted guidelines for properly erasing data -- a procedure that basically involves overwriting all data on the disk with alternating codes of 10101010 and 01010101 between five and seven times.
Hard drives aren't the only place where confidential information might hover, however. Routers, switches, and other network devices may well contain passwords, server IP addresses, and other information that could give potential intruders an open door into a corporate network. Wilkinson relates a story of the time he was at a computer fair and saw a vendor offering a used router from a leading telecommunications company with the company's name still written on a piece of masking tape on its side.
Licensing, security, and physical disposal issues highlight the many pitfalls that can trip up unsuspecting companies as their IT equipment reaches the end of its life. While the urge to preserve equipment as long as possible is natural, there also needs to be specific policies in place to dispose of that equipment quickly once its maintenance cost exceeds the cost of buying new systems.
Similarly, cumulative licence costs need to be managed over time to ensure it's not more expensive to keep outdated devices licensed that it would be to get rid of them all and migrate to a small number of faster servers. In the end, knowing when to cut your losses is the key to maintaining a cost-effective IT lifecycle.