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Technology asset recovery; there's a cache of cash in your replaced equipment.


Major corporations that would never think of giving away valuable inventory or tying up funds in unused buildings often throw away immense potential income by not planning for timely disposal of used communications equipment.

It's hard to imagine management tolerating a parking lot full of idle used vehicles a transportation manager "never got around to" trading in when new fleet replacements were purchased.

Yet hundreds of companies sit on millions of dollars in replaced PBX's, muxes, PCs, computer terminals, cabling, and other equipment.

It not only loses value by the minute, it takes up expensive space.

Because of rapid changes in technology, there is an all-time-high inventory of used equipment not in service.

Its potential market value is up to $1 billion in any given year, according to conservative estimates.

Instead of enhancing the all-important bottom line, it gathers dust in warehouses or other storage areas.

Big Impact

Technology asset recovery should be an increasingly important part of your job.

When you exchange idle systems for cash, you earn your company's respect realizing maximum potential through adept turnover.

But companies need formal policies for handling resale.

They devote great effort to buying the newest systems but only passing thought to what's laid aside.

It's not just the small or inexperienced company that errs. One of the nation's top banks crammed an entire New York skyscraper floor with boxed-up unused equipment worth several millions of dollars.

While managers dallied two years on a disposal decision, the gear lost much of its once-impressive asset value.

Finally, in desperation, with a lease expiring, the bank had to pay to have the entire lot removed and disposed of.

Moving It Out

When a company wakes up to the value of its replaced equipment, its normal first move--a resale overture to the original vendors--usually runs up against a stone wall.

AT&T and other primary vendors aren't interested in buybacks.

Where, then, does a corporation turn for expertise, connections, and capabilities to seed selling counsel?

In many cases, the answer is an emerging service-oriented aftermarket company.

They fill a growing need, since the equipment manufacturers feel they have a conflict in remarketing used equipment. They see it as cutting into sales of their new generation of products.

By contrast, aftermarket vendors thrive solely by disposing of replaced items at a fair price, and acquiring any necessary refurbished equipment economically.

Why Bother?

It may seem easier to box up the old equipment and postpone thinking about it, but that's like throwing away one out of every four dollars you could realize.

Within a year or two, the resale value could drop by as much as 20 to 50 percent.

Even more compelling (and impressive to top management) is the fact that as much as 50 cents of every dollar in costs laid out for a nifty new telecommunications system can be recouped.

A further savings, often overlooked, comes from freeing up costly space wasted by storage. What do you suppose that skyscraper floor space in Manhattan rented for, for two years?

"Another reason for the opportunity is the current economic tightening," says Jack P. Cowlishaw, president of Atlantic Telecom Companies.

"Executives are searching for ways to strengthen capital assets. If they can turn to the asset base and create funds, it's a real plus.

"Any manager who 'finds' money where none was expected can be a hero."

Teamwork That Works

Certain practices can help your dealer be most effective in profitable equipment disposal, and thus maximize the profits.

One of the primary ones is giving the chosen vendor enough time to evaluate the equipment, and to seek out a match, a prospective buyer looking for a similar system at an affordable price.

If you call a vendor one day, and say your surplus has to be sold in 48 hours, he's more reluctant to take it on, because there's not adequate time to discover what customers are out there for the material, and to put together a deal.

With the opportunity to plan, everyone wins; the aftermarket company has time to locate someone who's willing to pay a reasonable amount for your surplus, and you can plan on recouping some of the cost of your new equipment almost the same day it is installed.

Don't second-guess your dealer. Once he's on board, acting for you, don't try it on your own. Remember, a dealer talking to another dealer, or another company, can be tougher on your behalf, because he's operating from a total knowledge of the current supply-demand realities. He knows the people equation as well...when it works to hold out for top dollar...or if it may be more expeditious to shake on it, and finalize the deal now.

Full-Service Approach

A Fortune 500 level company, or others whose quickly-changing technology dictates a high turnover in telecommunications equipment, should consider an ongoing relationship with an aftermarket dealer.

Although corporations tend to think of the secondary market strictly as a commodity, they should think of it in terms of being of greater service. What is lost sight of is the expertise and knowledge of the secondary market, that it is ideally suited to meet needs in the area of technology asset management and recovery.

Some secondary market companies work hand-in-hand with Bell Operating Companies. Companies that can procure both an "inbound" and "outbound" supply from the same firm benefit from added service and commitment. The expert provides continuous consultation.

Other companies benefit from a retainer-based service, which eliminates most of the mark-ups charged otherwise. For a flat fee all secondary market purchases and sales are managed, with a nominal transaction mark-up on the buy side, and none whatsoever on the sell side.

It's a good way for businesses with large telecomm systems to maximize their flexibility and minimize their costs.

As awareness of the potential bottom-line asset contributions of technology asset recovery grows, the forward-looking telecomm manager will need to call on well-qualified industry suppliers for direction and advice.

The quality and service-oriented secondary market companies are waiting in the wings. They have this new capability that the user community should be considering.

Guidelines for Recovery

Having the right information is important in dealing with asset recovery. Cowlishaw suggests telecomm managers keep the following guidelines in mind as they proceed:

* Don't procrastinate. In today's market of swiftly-changing technology, equipment can easily lose as much as 30 percent of its value within a year or two.

* Use others' savvy. As an inexperienced player, don't try to cut your own deals. For best profits with the least hassle, hire a pro.

* Give advance warning. Tell your vendor of impending availability, preferably three to six months ahead, if possible. This gives him time to put together the best deal in order to maximize the cash you get.

* Go for an established company. The better secondary marketers have resources of enough magnitude to match up with major corporations. They have a corporate orientation with the long-term focus needed to selectively forge an ongoing relationship.

As a team, they can develop a technology asset recovery program that works.

* Consider a "package." Explore the possible financial benefits of using your secondary marketer as an agent for your inbound parts supply as well as for selling your surplus.

* Tap "insider power." An ongoing vendor relationship keeps managers continually updated on late-breaking equipment bargains and resale opportunities.

* Be flexible. Take your dealer's advice on shifting your timetable to take advantage of special offers in order to get the best possible price for the telecomm hardware you want to move.
COPYRIGHT 1991 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Publication:Communications News
Date:Jan 1, 1991
Previous Article:Beyond voice mail.
Next Article:Open-system E-mail security; putting a new twist on an old problem.

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