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Outlook 2010

Does it have to be shiny and new?

By , Network World
January 04, 2010 12:02 AM ET

Network World - Even if the economy rebounds, some buyers might have learned the hard way it can make more sense to squeeze life out of existing assets than to buy anew.

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The savings are hard to ignore. If you can extend the life of a PC from 36 to 48 months, you can save $600 to $700 in total cost of ownership for every $1,000 of original procurement expense, argues Bob Houghton, CEO of IT asset recovery and disposition vendor Redemtech.

And there are similar gains to be had by extending the life of servers, storage equipment and other IT gear. "Each of those devices is going to have a sweet spot for a nice long lifecycle that doesn't impair productivity or lead to increased maintenance costs," Houghton says. "The recession is teaching IT finance people this very lesson."

In addition to extending equipment life cycles, enterprises have shown a willingness to refurbish their gear or purchase used equipment instead of buying new. In an IDC survey, nearly 75% of respondents reported buying refurbished PCs, servers, storage and peripherals

"If you think about it as an analogy to the car market, there are a lot of people who understand that, depending on their circumstances, buying a partially depreciated asset can be quite economic and a very good value," Houghton says.

One large bank that uses refurbished desktops, data center gear and telecom equipment has been keeping track of what it costs to refurbish and redeploy an asset, as compared with its negotiated vendor pricing for new gear. "For every dollar they spend refurbishing and redeploying, they defer $14.50 in new procurement. It's a huge gainer in terms of preserving capital," Houghton says.

Overall, "the big change we see is that thrift is cool, thrift serves the business. And thrift is not a word that IT has ever used before," Houghton says. "I think it's a permanent change."

Read more about data center in Network World's Data Center section.

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