VideoWhen Huntington Bancshares bought 4,000 new personal computers last year, it held out some hope that the 2,000 old PCs and several hundred servers it was replacing would fetch something on the used-computer market. As it turned out, the bank literally could not give them away. "The machines are becoming cheaper and cheaper," says Brad Gaitten, vice president of network and customer support services at the large regional bank, "so it really becomes easier for some charities just to buy them or to set minimum requirements for what they'll accept." In the end, the bank gave away fewer than 100 PCs and got what Gaitten describes as "very minimal" results on the resale market.
Call it the flip side of Moore's Law: the relentless surge of technological improvement has ensured an equally swift and powerful backwash of obsolescence. The simple truth is that in terms of residual value, PCs are a lot more like dot-com stock options than Toyotas.
Indeed, after 24 to 36 months, PCs have lost nearly all their economic value. That's why some experts say the first step for CFOs and CIOs formulating what's known as an asset-disposition program is recognition of that reality. "There is the perception that all that equipment still has some value. In a lot of cases, there is no value," notes Frances O'Brien, research director at Gartner.
Jennifer Koppy, a senior research analyst at International Data Corp., puts some hard numbers to the reality: "If a CFO trades in to the original vendor or a competitive vendor, they can expect to receive 7 to 10 percent of the original cost — if they get rid of the PCs within 24 months," she says. Hang on to them longer and you'll likely pay about 3 percent of the original cost to get someone to take them off your hands.
But poor or no resale value is the least of the headaches facing organizations that need to retire old equipment: they must also consider the legal risks of disposing machines that are lethal repositories of such toxins as lead, mercury, and cadmium. Computer monitors can contain four pounds or more of lead, which is used to shield against radiation (the Environmental Protection Agency has estimated that about 70 percent of the heavy metals in U.S. landfills comes from discarded electronics).
Apart from potential Superfund liability, disposers of electronic waste face an ever-more-punitive local regulatory environment. California and Massachusetts have already banned landfill disposal of cathode-ray tubes, and other state legislatures across the country are preparing their own measures to tighten control over electronic waste. "At last count, we were aware of legislation pending in 22 states," says Kathy Ferguson, the business-unit executive for asset-disposition and support services at IBM Global Financing.
The Silicon Valley Toxics Coalition estimates that fewer than 10 percent of computers are recycled and that up to 80 percent will eventually be shipped overseas to China, India, and other countries, posing an environmental threat and substantial health risks to the workers who dismantle them. Europe's more-stringent laws governing E-waste may provide a model for the United States with regard to both disposal and "green" design, and last year, a group of 15 mostly smaller electronics recyclers signed a pledge to responsibly dispose of hazardous E-waste in the United States and restrict its export overseas.
But to date, legislative activity at the federal level has not given environmentalists much to cheer about. In March, Rep. Mike Thompson (D-Calif.) introduced legislation that would affix a $10 fee to all PCs, monitors, and notebook computers, and provide incentives for vendors to take them back to recycle or otherwise reuse. Dubbed the National Computer Recycling Act, the bill would also require the EPA to work with private organizations and state and local governments to establish computer recycling programs. But Thompson's earlier attempt to pass similar legislation stalled in the House. Levying fines for improper disposal has proved more effective than spelling out the terms of proper disposal or mandated recycling. A number of grassroots efforts are under way but tend to target consumers, not businesses.
The Junkman Chargeth
Perhaps even more worrisome than environmental exposure are the new consumer data privacy laws that turn hard disks into ticking time bombs. Financial-services firms face new customer privacy protection requirements under the Gramm-Leach-Bliley Act. For health-care companies, the Health Insurance Portability and Accountability Act sets both civil and criminal penalties for exposing patient records. Last year, John Halamka M.D., chief information officer of both the CareGroup Healthcare System, an alliance of six Boston-area teaching hospitals, and Harvard Medical School, disposed of roughly 1,500 PCs and 140 servers. Not only did he get no money for the used gear, but in some cases, the hospitals actually had to pay to have the old equipment destroyed.
Indeed, more than 315 million computers will require recycling or trashing by 2004, according to the National Safety Council. This looming trash heap represents a business opportunity for players large and small that are swarming into the asset-disposition industry. It also forces companies to think about how they should dispose of old computers, preferably before they buy them.
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