Why the channel should look more closely at circular IT
The channel is missing out on potential revenue and a key differentiator, circular IT suppliers tell CRN
A report published earlier this year claimed that, globally, 50 million metric tons of IT equipment is wasted every year.
The research coincided with Circular Electronics Day, which is designed to encourage IT buyers and sellers to reuse equipment, rather than throw it on the scrap heap in favour of shiny, new devices.
But is there money to be made for the channel in second-hand and remanufactured equipment?
According to Steve Haskew, strategic commercial manager at Circular Computing, the channel is ignoring a potentially fruitful business opportunity by not tapping into its customers' sustainability targets.
Circular Computing is a laptop remanufacturer, meaning it takes in redundant units from its customers, breaks them down to the raw components and rebuilds them, before selling them back into customers via the channel.
The laptops aren't rebuilt to the same specifications - instead they are turbo-charged with improved memory and hard drives and made to order, meaning that an organisation can order hundreds of remanufactured machines of an identical specification.
The benefits of the model are far reaching, Haskew explained, transcending environmental, ethical and financial issues.
Speaking to CRN, he picked out three key issues that are mitigated by circular IT:
1. Natural resources
Firstly, the planet contains only so much of the minerals needed to create the components in computers.
The strain on natural resources is already being seen, with the price of memory being hiked over recent months.
"At a mineral level it's not sustainable," Haskew said. "There is only 100 per cent of something and no one knows how much 100 per cent is.
"The value of these minerals is going to go up and it's going to put a pricing pressure on technology; we're seeing that happen with things like memory and SSD already.
"It's not necessarily down to a call on the demand of the finished stock, it's the minerals that actually make the finished stock. It's the brokers that sit behind the factories controlling the price of the minerals."
2. Ethical supply chain
Second is the murky world of components supply chains.
Great lengths have been taken over recent years to shut down the supply chains controlled by warlords in African countries, which dominate the earth's reserves of minerals needed for the manufacturing of components.
Cobalt, for example, is a mineral used to create batteries which sees over half of its global supply come from the Democratic Republic of Congo (DRC).
Washington DC-based not-for-profit organisation The Enough Project was set up in 2007 to clamp down on crimes against humanity, such as genocide and slavery, which are heavily linked to the mining industry across Africa.
The Enough Project publishes reports naming and shaming tech firms that are not doing enough to generate conflict-free supply chains in the DRC.
Last year Apple was scored as making the most progress, while Sony, Samsung and Toshiba were deemed not to be making enough progress.
Incidentally, Apple was last week reportedly close to agreeing a deal that will see it buy Cobolt directly from the mines.
The US' Dodd-Frank Act, which was signed into US law by President Obama in 2010, has also been credited with starting to address the issue. The act makes it compulsory for tech companies to disclose their supply chain for certain minerals sourced in Africa.
"The ethical supply chain of getting things to the user is bent," Haskew said. "It's not just laptops, it's things like clothing as well, but in a laptop there might be cobalt and this comes in the main from the DRC, which is a military state.
"Remanufacturing takes care of that because we don't call on the minerals that are used - we're using something that's been made."
3. E-waste
Thirdly, and perhaps most widely publicised in the tech arena, is the vast amount of waste generated through the disposal of old devices.
Research published in January claimed that 50 million metric tonnes of IT products are discarded every year.
Circular Computing carried out research with the UN University and found that 150,000 laptops are discarded every day in the EU alone.
Circular Computing itself can remanufacture around 500,000 devices a year, Haskew said, and he claims its products see only a three per cent reduction in performance when compared with new products.
The devices come with a three-year warranty and Circular Computing offers to take them back at the end of the cycle to remanufacture them again.
"If you add all those things up, it becomes a no-brainer from a corporate point of view," Haskew said. "If the computer can perform toe to toe against a new computer then why wouldn't you consider this, as the most ethical and sustainable product?"
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Why the channel should look more closely at circular IT
The channel is missing out on potential revenue and a key differentiator, circular IT suppliers tell CRN
Channel opportunity
The issues above will have varying levels of important to different resellers, but two areas will have the utmost importance: the quality of the products and the profitability of the model.
Haskew said that Circular Computing, which operates a channel-only model, can offer resellers margins of around five times those offered by a vendor selling its new products through the channel.
He said that a major roadblock for sustainable IT at the moment is confusion around the difference between refurbished products and remanufactured products. Both the channel and end users, he explained, mistakenly think they are the same thing, but where a refurbished product has only had superficial treatment before being resold, a remanufactured product has been completely rebuilt.
The greater obstacle at the moment, however, is breaking the current pattern of IT purchasing.
"The biggest challenge that we're currently working through is changing how people purchase their technology," he said.
"Bureaucracy is involved and people have signed deals to buy IT in a certain way for four or five-year contracts, even though they know they're suffocating the planet.
"It's about public awareness and campaigning around trying to change how people buy IT. People are buying circular computers by the hundreds of thousands but that isn't it; it's about changing public opinion."
But the channel can play its part here, while winning some shrewd business at the same time.
Haskew said that the vast majority of C-suite executives at organisations will have targets around sustainability, and therefore will be open to any conversations that can help them hit these targets.
"[Partners] need to understand what their clients want from sustainability and in doing so they can add more value," he said.
"They need to be open to talking about different things, rather than tin and software, so they can speak to people at a higher level. The sustainability people in organisations tend to be C-suite and close to strategy - it's a mile away from the IT team.
"If partners ask their customers if they're committed to sustainability targets, I guarantee some of them will be, so the channel can help them hit those targets by supplying IT that is more sustainable than what they already have.
"That's a question I can pretty much guarantee they've never asked, but if they did they'd be speaking about something that no one else is speaking about."
Circular computing in action
One reseller prospering in circular IT is Stone Group. The £85m Staffordshire-based firm is a top education partner for the likes of Apple and HP, but also manufactures its own machines.
CEO Simon Harbridge told CRN that IT suppliers have been obliged to dispose of their clients' end-of-life devices since the WEEE Directive came into play.
Stone however saw an opportunity, Harbridge explained, and now takes end-of-life devices and refurbishes them at its Staffordshire facility, before selling them back into the market.
The firm sells around 100,000 devices a year, but brings back more than double this, at 240,000.
The service was originally offered only to Stone customers who were returning devices after refreshing their range, but around five years ago Stone opened up the recycling-as-a-service to non-clients.
"It rapidly became very successful and we actually built it into one of the leading IT recyclers to the public sector," Harbridge explained.
"We built a quality business within a business to recycle for our own customers, but after a while we realised we were selling recycling as a service to the 6,000 customers that Stone sells new products to, but there are hundreds of thousands of organisations all over the UK that require the service."
Around 62 per cent of the products Stone brings back into the business are resold, with the remainder stripped down to the raw components and put back into the supply chain. None of the materials end up at landfill sites.
Harbridge said Stone sees considerable success with this model in education - a sector renowned for having to stretch its IT budget a long way.
"Because of the demand for devices and the budgetary constraints on the UK education sector we created the Stone Approved brand," he explained. "They are slightly better-quality devices that you can tell have been used - the keyboard might be slightly worn - but there is no physical damage and they're the better-performing machines.
"Because we're a manufacturer as well, we completely strip these machines down and rebuild them with extra memory, and configure to the customer requirements the same as we do with new products.
"We sold over 5,000 of those last year into schools and colleges that were wondering how to spread their IT budget."
Harbridge said that while not all resellers will have the capabilities to be as involved with sustainable IT as Stone, there are opportunities for them to prosper while taking a green approach.
Stone, for example, makes its own recycling capabilities available to other partners through a white-labelling model.
More to be done
ADISA - or Asset Disposal and Information Security Alliance - is an industry body that promotes a set of standards around the disposal of IT equipment. Its members include the likes of Stone, ACC, Centerprise and Arrow. Steve Mellings, CEO at ADISA, said circular IT is struggling because too many organisations are choosing to destroy their IT equipment at the end of life, rather than feed it back into the system.
Part of their reasoning for this, he explained, is that organisations are scared that their products will not be sufficiently wiped and the data will end up in the hands of a third party. This fear has only been heightened with GDPR approaching.
"The benefits of the circular economy are enormous," he explained. "We see members processing equipment that is six or 12 months old that has a whole new lifespan, if not two more cycles left. If you start destroying that type of equipment, we really are at the beginning of the end of our use-and-abuse commodity society."
Mellings said that circular IT can however be a difficult proposition for the channel because of the associated costs.
A supplier would be expected to retrieve an end-of-cycle device, wipe the data, potentially replace components and carry out tests - all of which cost money and eat away at margins. Because of this, the price of second-hand devices can sometimes be driven up closer towards the price of new products.
In other cases the opposite can happen and suppliers can cut corners to keep prices down, and end up releasing a sub-par product to the market.
"This is where circular economy falls down," Mellings explained. "The quality of second-hand equipment does vary dramatically.
"People in the channel are having to make their money on product resell, so they keep their processing down as much as they can.
"Some organisations I know do very little in terms of processing equipment, repair and testing because it costs money to do that.
"A lot of organisations sell into the broker market and the brokers don't care if you haven't stress tested a battery to see its lifespan."