Embrace Your Competition: A Critical Success Factor

A client was recently the target of negative advertising by one of his competitors. The two-page ad depicted a cartoon image of a shark in business attire wearing a Rolex watch with the caption “Some Suppliers need a Vice President of Service because they depend on Parts and Service Dollars…”  The second page described how the advertisers’ product engineers are measured on customers use of their parts and services including a 5-year warranty,

From my perspective, these types of claims are troubling for several reasons:

  1. These type of advertisements “trash the competition”.   Sales and marketing professionals understand that going negative is not good for business.  Most manufacturers would not use this approach when it comes to selling their equipment in their primary market. Yet some believe anything is fair game in the Aftermarket.
  2. It demonstrates negativity on the advertiser’s part with respect to the role and value of service to the customer.  Their claim overlooks the importance of service to KPIs like First Time Fix rate or Customer Satisfaction.  This implies that service is not necessarily needed and not strategic to the customer or the manufacturer.  This is just flat out misleading.

I have also seen negative advertisements and claims made against Third Party Maintainers (TPMs) and generic parts manufacturers, and I don’t like it either.  Trashing the competition is just wrong.  The quality and reliability of products and services from these third party suppliers can be just as good or better as those form the OEM.   Furthermore, many OEMs also market and sell 3rd party services of their own.

The bigger issue is not about whether OEMs are better than TPMs, or if genuine parts are better than generic, or even if creating a VP of Service and/or operating service as a profit center is good for business.  Rather, the issue is competition is good for both business and in the Aftermarket for several reasons:

  • Legitimizes the market– Markets are defined by the presence of competition. To win business, competitors must actively market their products and services. As a result, customers are aware of options available to them.
  • Creates choice– Competition offers customers the freedom of choice. The theories of capitalism and free trade are built on this basic premise.
  • Improves quality & efficiency– Competition in the Aftermarket forces third parties and OEMs to continue to find ways of improving the quality of products and services offered while at the same time finding ways to cut costs and improve efficiency.   In other words, competition raises the bar and results in better prices for customers.
  • Leads to innovation– In addition to raising quality and improving costs, competition drives service providers to become innovative. Without competition, it is hard to know whether service providers would focus on finding ways to add value. Would service providers be just as compelled to invest in new systems and technology like SaaS, Mobility, and IoT if not for the impact that competition has on innovation?
  • Leads to greater cooperation– OEMs have the choice to subcontract service to TPMs/ISOs. This helps them improve their cost structure, service delivery and obtain capabilities that they may not otherwise be able to build themselves. Under this scenario, OEMs and ISOs can gain knowledge from each other and use this towards driving innovation, reducing costs, and improving quality

In summary, competition provides benefits for the customers, OEMs and third-party providers. Technology vendors can also benefit from competition in the Aftermarket.  Based on my perspective, if a company resorts to trashing their competition, they are probably troubled in some way.  On the other hand, if a company is concerned about their competition, they should probably focus within their organization to find ways to leverage forces to their strategic advantage and develop a higher value proposition.

Post your comments or questions below!  

Protecting Your Brand in the Secondary Channel

A True Case Study

This week’s blog is a guest post by Fizah Jadhavji, CEO of Vivitech Solutions, Inc. — a major player in Reverse Logistics, closeout, excess and obsolete products marketplace.

Every major OEM brand selling to big box retailers such as Walmart, Target and Costco must accept customer returns- this is a challenge that all companies in today’s marketplace face. Poor return management practices can easily eat up your bottom line as well as damage a brand’s reputation. Many OEM’s are apprehensive about liquidating returned products due to fear of channel conflict, interference with sales of new products and dilution to the brand’s reputation.  In fact, top-tier branded products that are sold within online channels deeply discounted as “new open-box” often are the result of ineffective return procedures.

When these “at-risk” and returned inventory stocks that are liquidated for 10 cents on a dollar show up on Amazon and eBay, it opens the door for the end-user to claim warranty for a product that you already liquidated! Consequently, many OEMs are left in a position where they may issue return credit on the same item twice!

How do you efficiently manage the product return cycle if you are a major brand selling thousands of products and multiple categories across the USA? How can you best handle returns without having to spend more capital just trying to control your exposure in the market?

THE MILLION DOLLAR PROBLEM
This was the million-dollar question an OEM client of Vivitech Solutions was facing in managing their returns. At issue, the OEM was offering advance return allowance to retailers, which in-turn allows the retailer to charge back a certain percentage to the OEM on every invoice to cover returns. This initially seemed like an economically feasible solution because the OEM was able to cut costs. Retailers constantly need space and by receiving advance return allowance, they have the right to dispose of unwanted returns anywhere they choose. However, the OEM soon realized their product kept popping up everywhere at extremely low prices. They were constantly competing against themselves, and they were being double-dipped on the warranty side as well.

The OEM also noticed that some products being returned that had already come through their return center once, meaning that the OEM issued a refund or exchange twice for the same unit. Their legal team did some research and found that returned products were starting to show up online as “new open box” products with prices below market value. Thus, the OEM’s warranty center started receiving phone calls from customers who were misled into buying a used product as new. The OEM’s’s first reaction was to immediately stop the bleeding – so they stop offering advance allowance and asked all their customers to start shipping the product back to the OEM’s distribution center. The OEM would audit the RMA’s to ensure accuracy, and then destroy the units – allocating additional time, labor and financial resources to ensure that returned products were being properly reported and disposed of.  The OEM quickly realized that this process was not financially feasible, and was directly cutting into their profit margin. As pressure started building for our OEM client, top management realized they needed to find a creative solution.

THE MILLION DOLLAR SOLUTION
Vivitech Solutions solved the OEM’s problem by creating an end to end solution for managing returns. Vivitech was appointed the exclusive National Return Center and authorized repair center for the OEM.  All shipments from the retailers where sent directly to this location where they were audited.   In addition, Vivitech provided  a data-driven approach which allowed for  a triage analysis of the product, costs, and market prices to achieve the highest return by refurbishment and servicing. Vivitech also remarketed  these refurbished goods in secondary channels and smaller retailers. This helped to prevent channel conflict and protected the OEM’s primary product line.

THE MULTI-MILLION DOLLAR RESULT
This solution has been in place for  three years and the OEM is very pleased with the program’s performance. The OEM was once spending six figures annually just to handle the logistics of the return process, only to end up destroying these products in landfills afterwards. They have now off-loaded the headaches of handling returns themselves and  significantly reduced overhead costs in exchange for benefiting annually from a seven-figure secondary source of revenue.

Basically, Vivitech created a secondary market and constant revenue stream for their OEM partner. In fact, the OEM’s sales team & outside reps now offer and sell Vivitechs’ “factory-serviced” products to customers as second-chance discounted products.  This case study shows how by outsourcing the reverse logistic function, a process that was once depleting profit margins,can result in a higher profit margin, recurring  revenue, and higher ROI.  Truly a win-win for all parties involved.

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Sell More Service By Providing More Value

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Over the last month I’ve spoken to over two dozen Field Service Executives about challenges they are facing when it comes to generating additional service revenue for their companies.   I observed several common themes.  First, every executive I interviewed indicated that they would like to sell more service contracts.  However, they were experiencing resistance from customers as evidenced by low contract attachment rates.   Second, these executives were concerned about whether or not their prices were too high or if their customers really needed service contracts.  After all, this was the feedback they were receiving from their sales teams and even first hand from the customers that had spoken to directly.

This is an all too familiar problem for me.  I’ve encountered this for the last twenty five years as a management consultant. It is also a challenge that many field service executives face.  Seldom is price the real issue why companies struggle to sell service contracts.  In market research studies that I have completed for clients in a wide array of technology service industries, I have found that price is often low on the list of criteria that end-users consider when selecting and evaluating service providers.  Indeed, criteria such as quality of service, knowledge and skill of service personnel, breadth of service offering, and vendor’s knowledge of their business are perceived by customers to have higher importance than price alone.

The truth is “your price is too high” will always be an objection that customers provide when they cannot justify the purchase of a product or service.  In other words, they have no way of logically defending the value of the service being purchased.  Stated another way; they are not able to differentiate the benefits of service contracts from time and materials service.  The problem is that Field Service Organizations (FSOs) often attempt to sell service contracts without providing reasons why a contract is better than simply paying for service on a time and materials basis.   In order for end-customers to rationalize their purchase of service contracts, FSOs must be able to demonstrate the contrast between service contracts and time and material/pay as you go service.

In order to achieve this outcome, FSOs must be able to articulate the value of service contracts to customers as well as to their own sales people. They need to describe what’s included in a service contract that is not included in time & materials. This requires they do an effective job in defining the service contract and answering the question “What’s in it for me (the customer)?”  If the only difference between a service contract and time & materials is that the customer is able to prepay for service, then there is no value and no contrast.  However, if the service contract provides a preferred level of service (e.g., 4 hour response time, 7 by 24 hour coverage, parts, etc.) or preferred price structure then the customer is presented with some real value and contrast.

Ultimately, FSOs must be able to help customers defend their purchase of service contracts.   They do this by offering more value in a service contract than the customer could possibly receive through time and materials services.  Another way that FSOs can help customers defend their purchase is by letting their customers know why they offer service contracts in the first place, and why they prefer customer purchase them.   Usually, service contracts help FSOs do a better job at anticipating and managing service requests. It helps the FSO forecast and plan resources better.  As a result, service contracts benefit the customer which is something customers will understand and appreciate.

If your company is facing struggles when it comes to selling service contracts then perhaps it is time for a marketing tune-up.  A tune-up will identify where there are challenges in your sales and marketing process and more importantly, explain how to overcome them.  If you are interested in learning more, then contact me to schedule a free strategy session where I’ll describe what’s involved in a marketing tune-up, help you determine if it is something you need, and explain how you can get started. Isn’t it about time you stop leaving money on the table and start winning more business.

Got a question? Click here to schedule a free consultation

Turbocharge Your Service Business

Maximize Revenue through Market Research

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In my last series of blog posts I wrote about what it takes to build a Successful Service Marketing™ program.  To review, I described the strategic concepts of service marketing and introduced you to the 7 Ps. These are of course very important concepts. However, there are a few more concepts you’ll need to master if you are going to win at service marketing. If you’re going to be successful at service marketing or any kind of marketing, even if it is product marketing, you have to have good knowledge of your market.  You get that knowledge through market research. If you know who buys, what they buy, and why they buy then you can sell more to them and get them to buy more often.

Market research also provides the insight needed to communicate effectively with your current and prospective customers. It helps determine what messages, what images, what ideas will resonate with them and get their interest to want to buy from you.  Marketing is about taking a need and converting it into a want. You may need a watch to tell time but you want a Rolex because of the status and prestige associated with owning one.  So when you have really good market research of who buys, what they buy and why buy, then you can construct your message in such a way that you turn a need to a want.   In the field service world, you customers may need to know that they can get service on their equipment when it is down but what they really want is a guaranteed Service Level Agreement with a 4-hour response time.

Good market research not only helps in creating a service portfolio your customers really want but it helps in developing an optimal pricing strategy for that portfolio.  Chances are that you are familiar with cost plus and competitive pricing strategies. With cost plus pricing, you calculate what it costs to deliver service and then mark it up by an amount to cover you profit.  With competitive pricing strategies, you conduct market research to find out what your competitors are charging and then price your services at a lower amount.

A third type of pricing strategy is called value-in-use pricing. It basically involves measuring the economic value or loss to the customer of not having the service available in a timely manner.  This can be significant.  For example, a manufacturing facility may lose millions of dollars every hour its machines are down.  Therefore, they may be willing to a pay premium for faster service.  Market research can help you understand your customers’ value-in-use and determine whether or not you should pursue a cost plus, competitive, or value-in-use pricing strategy.   You’ll need to understand all three pricing strategies and how to effectively leverage market research to maximize service revenue and optimize profits.

The final aspect that you have to master to win service marketing is called ‘‘Invisible Selling”. This is based on the premise that you win business not by pushing your offers onto prospects, but by pulling customers towards you. One of the ways you pull customers to you is through indirect marketing as opposed to direct selling.  What’s an example of indirect marketing?  It’s an article or white paper that demonstrates that your company understands the problems that companies in your market are experiencing and that you have solutions to these problems.  It’s about using social media and public speaking opportunities to influence others to want have a conversation with you to learn more about what you do, and how you can help them.   It’s about positioning you and your company as experts and trusted business partners.   By the way, seeding your thought-leadership content with market-research data is a sure-fire way to build credibility with current and prospective customers.  Once you establish credibility they follow you and then it’s only a matter of time until they become your customers.

When you put all the elements of a Successful Service Marketing™  program together, when you fully understand the strategic concepts of service marketing, when you effectively apply the seven principles of service marketing, when you learn how to optimally price your services, when you use market research effectively, and implement an invisible selling strategy, you’re going to experience incredible results.  Your marketing program will be extremely successful, your sales will take off, and your business will skyrocket.

If you are really interested in achieving extraordinary results, then check out my online training course where you will learn strategies, tactics, and insights for Successful Service Marketing ™. As a starter, I’ve put together a brief video that describes the course content. You can access it here

Got a question? Click to schedule  a consultation.

Strategic Concepts that Fuel Revenue Growth

The Basics of Service Marketing Theory

Fuel Growth

It probably comes as no surprise that service executives are often focused on finding ways to increase top line revenue, boost profits, and expand market share. Indeed, these are usually among the most important initiatives that service executives pursue when it comes to charting the future of their business.

In order to achieve results, service executives need to master three fundamental or strategic concepts about service marketing.  It is important to understand these strategic concepts because they form the underling theory of service marketing, and – as you will read below – theory is what forms the basis of our reality.  By understanding service marketing theory, you can shift your perspective from product marketing to service marketing. Without this shift you can never expect to implement a Successful Service Marketing™ strategy.

One of the most critical strategic concepts of service marketing is that perception is just as important as reality.  Ultimately, the perception that a customer has about a service provider is what influences their decision to work with that service provider.  In other words, customers buy both perception and reality.  As a service provider, you must influence their perception of your capabilities.  Customers need to trust that you have the capacity to deliver service before you actually deliver it.  It’s not just the actual service that they are buying that creates value; it’s your ability to manage their perception that creates value.  Perception is what sells; your performance is what keeps them coming back.  Reality must equal perception otherwise you will have an unhappy customer on your hands.

A second strategic concept that service marketers need to understand is that customers pay more for services over the lifetime of a product than they do when purchasing the product itself.  In fact, they may pay as much as 8-10 times more for services than what they originally pay for the product. This may seem like an absurd statement at first glance. However, consider the fact that the customer may own or operate a piece of equipment for five to ten years or more.  Over that period of time they may require a broad spectrum of services ranging from installations, to remote support, to field service, to replacement parts, to training, and so on.  Clearly the dollars can add up over time.

The third concept has to do with understanding the relationship between “value in use” and time.  Value in use is about understanding the cost to your customer in absence of the service.  This is typically a function of time. Some services are mission critical.  If they are not performed in a timely manner, the customer may lose a lot of money by not having the service available.  You need to understand value in use in order to effectively price your services and articulate the value of what you can provide.  Most services are valued in terms of time. That’s because downtime equals money lost in the service world. The longer it takes to obtain service, the more costly it becomes for the customer.  The quicker the service is performed, the more valuable it is to the customer.  By understanding your customers’ wants from the standpoint of time, you can develop service offerings that meet these needs.  Furthermore, if you can meet the strictest of time requirements, than you can command a premium price for your service particularly if it is on a mission-critical product or application.

By mastering these strategic concepts you will begin to observe a shift in the way you think about service marketing.  This shift will help you become more effective in implementing marketing strategies that lead to higher revenues, greater profits, and increased profit share.  If you are really interested in achieving these outcomes, then check out my online training course where you will learn strategies, tactics, and insights for Successful Service Marketing. ™ As a starter, I’ve put together a brief video that describes the course content. You can access it here.

Please let me know what you liked about this blog and your key takeaways.  If you’ve found this blog of value and think your colleagues or business associates could benefit from it, kindly share it with them.

Strategies for Reducing Warranty Costs

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Warranty obligations represent both an expense and a liability to Original Equipment Manufacturers (OEMs). As a result, anything that an OEM can do to minimize warranty expenses and liabilities will have a significant impact on the balance sheet and bottom line. In the high-tech industry, warranty coverage often includes repairing defective products as opposed to crediting or replacing them. Warranties of this nature involve three (3) cost components: 1) Warranty Terms & Conditions, 2) Service Delivery, and 3) Product Reliability and Maintainability.

Service Delivery represents the largest of these three components and comprises approximately two-thirds of warranty costs. Approximately 55% of service delivery costs are attributed to repair activities. The remaining 45% of costs are evenly distributed between parts, logistics, and overhead (e.g., customer service, IT, etc.).

Among the three (3) different categories of warranty costs, service¬–delivery costs are the most difficult to manage and improve. By comparison, costs associated with warranty terms and conditions and product reliability and maintainability are easier to manage. OEMs can reduce warranty expense and liabilities by adjusting terms and conditions to make them more favorable from a cost-burden perspective. OEMs can also design and engineer better products thus reducing product reliability and maintainability costs. In addition, the time frame and investment required to plan and implement these types of improvements are smaller when compared to service delivery. On the other hand, these improvements may have a limited life span. In other words, an OEM needs to revisit terms and conditions as well as product reliability and maintainability issues with every new product release.

In contrast, a significant amount of time and investment is required to improve costs associated with service delivery. For example, it may take months or years of planning and hundreds of thousands of dollars of investment to realize service-delivery cost savings. However, the improvements are sustainable over a longer period of time because they don’t just affect costs associated with one-time product launches. Instead, they benefit subsequent product launches over a multi-year period.

The reason it takes more time to implement and greater investment to achieve cost savings in the area of service delivery is because it typically requires improvements in processes, infrastructure, and people (i.e., training). Examples of the types of strategies for reducing service delivery costs include but are not limited to:
Automating warranty claims-management processes to reduce warranty processing costs
Improving call management procedures to validate entitlement, troubleshoot and diagnose calls remotely, and avoid costly field service visits
Implementing dynamic scheduling software to improve field-engineer productivity and reduce travel costs
Adopting a Variable Workforce (VWF) model to lower field-service and associated overhead labor costs
Utilizing knowledge-management tools to improve resolution times, reduce No Fault Found rates, increase first time fix rate, and improve labor efficiency
Implementing advanced planning and forecasting tools to optimize spare parts stock levels and reduce inventory costs
Making it easier for field engineers to identify, locate and order spare parts thereby improving service efficiency and avoiding repeat calls due to lack of parts

In summary, the challenges associated with reducing service-delivery costs should not prevent a company from making the necessary systemic and procedural improvements since the gains in cost savings, service productivity, operating efficiency, and customer experience can be significant.

Service in the Sharing Economy

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The sharing economy is on the rise as more and more consumers conduct business transactions through platforms like Airbnb to find lodging and Uber for transportation services. These companies have experienced explosive growth in the last couple of years and their financial value is skyrocketing among the investor community.  Indeed, Airbnb’s valuation is at $25.5Billion in their attempt raise an additional $1.5 Billion in funding and Uber’s valuation of $50B is higher than 80% of the S & P 500 companies.

A sharing economy platform is one that leverages information to empower individuals and organizations with information that enables distribution, sharing and reuse of excess capacity in goods and services.

Sharing economy platforms take many different forms, including:

  • Product-service systems – privately owned goods that are shared or rented out via peer to peer market places.
  • Redistribution markets – pre-owned good are passed on from someone who does not want them to someone who does.
  • Collaborative lifestyles – people with similar needs and interests banding together to share and exchange less-tangible assets such as time, space, skills, and money.

 

I also think of a sharing economy platform as having a number of basic elements. First, it uses technology to create a peer to peer marketplace.  Second, they are “open” meaning anyone can exchange goods and services with anyone else.  Third, goods and services are available on demand.  Fourth, payment in full is often made only after the service is delivered in many sharing economy platforms. Fifth, fixed costs are converted into variable expense through the sharing of resources.

The success of Airbnb and Uber has not only led to the emergence of competitors in the lodging and transportation market but also the creation of sharing economy platforms in other industries.  “Uberized” has become a commonly used buzz word in the business world by industry analysts and thought leaders.  This word is often juxtaposed within the question… Is our industry the next to be Uberized?

To a large extent, High Tech Service & Support is far along the path to becoming Uberized. For example, product – service systems like Rolls Royce’s “power by the hour” form that basis of the “Servitization” trend which is gaining appeal in the High Tech Industry.   In addition, redistribution markets have existed for decades within our industry; just think about all the businesses in the IT, Telecom, and Medical Electronics industries that trade used and refurbished equipment.  Collaborative lifestyle solutions are provided through companies like Field Nation, Work Market, and PC-SOS that enable individual field service engineers and small businesses to become a contingent workforce for larger companies.

However, in many ways the High-Tech Service & Support Industry is not truly “Uberized”.  For example, the platforms/solutions I’ve identified above are not truly peer to peer.  They typically involve an intermediary or aggregator that manages the redistribution of products and services. Equipment owners (i.e., end-users) are not leasing or renting unused capacity to other users.  Second, some of these models are not truly open.  There is often a thorough vetting process involved in becoming a member or user of these platforms and solutions.  On the other hand, the on-demand, pay for performance, and conversion of fixed cost to variable expense elements of the sharing economy do exist today within the High-Tech Service & Support Industry

Regardless of where you think our industry is on the sharing economy spectrum there is certainly room for new innovation.   Now it is your turn.  I’d love to get you answer to this question…. Is our industry (i.e., field service, reverse logistics) the next to be Uberized? Please cite examples and share your thoughts on why or why not the sharing economy can work in our industry.  You can also feel free to schedule a strategy session if you have a great idea you’d like to vet or discuss with me in more depth.

Enterprise Service Management System Trends

 

enterprise-service-management2There has been a lot of attention given in recent years to the need to automate field service and related logistical processes through the implementation of Enterprise Service Management (ESM) systems.   Although the benefits from improved automation are well documented, there is still a segment of the market that is facing challenges to achieving measurable productivity and efficiency gains associated with key service performance metrics.  This shortcoming is due in part to lack of integration between Field Service and Reverse/Service Logistics functions.  The growing trend toward remote support combined with the increasing reliance on spare parts in the service resolution process places even greater demands on equipment service providers to ensure their field service and related logistical process are both integrated and optimized.   We conducted a survey among a cross representative sample of companies in the High Technology Service & Support Industry to validate these assumptions.  Over 250 respondents participated in the survey.  The survey results reveal a number of very interesting trends:

  • Greater reliance on Remote Support: The survey results support the fact that more and more service requests are being resolved remotely without the need to dispatch a field service engineer. More importantly, a large percentage of these remote activities are resolved by sending a replacement part to the customer site.
  • Best of Breed Solutions outperform Integrated Solutions: Despite the breadth of functionality found within integrated enterprise systems, our results indicated a higher level of satisfaction with Best of Breed solutions than with Integrated ESM platforms. We believe this is because best of breed solutions are more focused on the detailed processes and transactions involved in managing a field service and/or reverse logistics operation.
  • Perceived Gaps in Reverse Logistics functionality: Many companies perceive their ESM solutions have gaps in the ability to deal with Reverse/Service Logistics issues particularly when it comes to depot repair activities.
  • Integrated Automation is critical to success: The level of integrated automation between Field Service and Reverse/Service Logistics functionality has a direct impact on ESM effectiveness. More importantly companies with a high level of integrated automation perform better on key service performance metrics than those who do not.

 

In summary, our research findings reveal that companies who have been able to successfully integrate Field Service and Reverse/Service Logistics processes report a higher level of service performance than those who have not.  The most effective integrated solutions are those that incorporate best of breed functionality for both Field Service and Reverse/Service Logistics processes.  More importantly, the data reveals that these integrated solutions are not only highly effective in managing ongoing service requirements but essential to overcoming critical business challenges.

We’d like to thank IFS, a leading provider of Enterprise Service Management systems, for sponsoring our research study.  IFS has made available the results of our study in a 14 page whitepaper that can be downloaded at Whitepaper Download.   To better understand the implications of these findings to your organization or to define requirements for a best of breed, integrated solution, schedule a free strategy session with us today by clicking here.

The Five Most Important Trends Impacting the ITAD Market

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In my last blog post, I provided a high level summary of key findings from the recent market research study we conducted for Arrow Electronics on the topic of IT Asset Disposition Trends.   Now that I’ve piqued your interest, I thought I’d share five important data points from the survey results:

  1. 9 out of 10 companies in 2014 have a formal end-of-life ITAD strategy
  2. Nearly 2 out of 3 companies surveyed choose to have a 3rd party service provider manage their end-of-life assets
  3. The most important factors in selecting a 3rd party service provider are adoption of compliance standards, well documented chain of custody, and high quality reporting
  4. 95% of companies feel that R2 and/or e-Stewards are the most important environmental standards related to ITAD
  5. Nearly 9 out of 10 companies feel that R2 and e-Stewards should be combined into a single standard

 

These findings validate the fact the ITAD has gained increased attention among not only IT Managers but C-suite executives as well.  However, these findings reveal that most companies do not view ITAD as a core competency.  Instead they choose to outsource it to 3rd Party Service providers.  This explains the increased level of competition within the ITAD market as more and more companies enter this space.  It is not just start-up specialized ITAD vendors that are pursing this opportunity but well established IT Service providers and distributors like Arrow Electronics who view ITAD as a natural extension of their product and service offerings.

Given the large playing field of competitors, end-customers are becoming increasingly selective about who they choose to conduct business with.  Among the most important factors are compliance standards, documented chain of custody, and IT reporting and analytics.  It is interesting that while R2 and e-Stewards are perceived as the most important environmental standards, an overwhelming majority of end-customers believe that they should be combined into one, single standard. This suggests that these standards are used interchangeably by end-customers.  Possessing one or both of these industry standards is simply not enough for an ITAD service provider to differentiate itself in the marketplace. While many companies can lay claim to a well-documented chain of custody and superior reporting capabilities, we believe that its additional industry standards such as RIOS, ADISA, NIST, and knowledge of best practices to minimize risk, reduce waste, and maximize recovery values that set one ITAD vendor apart from one another.  If you haven’t read the Arrow IT Asset Disposition Trends Report, we suggest you obtain a copy, click here.    To discuss the implications of this report on your company or business, feel free to schedule a free 30-minute strategy session with us today.

A Strategic Analysis of ITAD Trends

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The data is now in from our large scale market survey conducted on behalf of Arrow Electronics on the subject of IT Asset Disposition (ITAD) trends.  The results validate a popularly held view among IT industry practitioners that ITAD considerations continue to be a top concern for all size companies.   In fact, knowledge of ITAD best practices continues to evolve and improve among C-suite and IT Executives.  However, as one might expect the issues and concerns between the two groups vary somewhat.

Our research also indicates that all companies, regardless of size, are more likely today than in the past to budget for the ITAD process.  In addition, corporations are becoming more aware of penalties arising from improper disposal of IT assets, which has led to an increased implementation of formal ITAD strategies.  While the most important factors for creating an ITAD strategy have remained the same over the last few years (data security concerns, commitment to “Green” business practices, and mitigating legal and financial risks), companies are far less likely to apply their ITAD strategy outside of North America.  It is also clear that companies who have developed a formal end-of-life ITAD strategy are far more likely to have an ITAD provider handle their IT assets when compared with companies who do not have a formal ITAD strategy.

Companies using a 3rd party service provider to manage their end-of-life IT assets are currently very satisfied with their providers.  When choosing these providers, ISO industry certifications are particularly important, with R2 and e-Stewards being the most important environmental standards.  Due to their equal level of importance and credibility, most companies feel that R2 and e-Stewards should be combined into one standard.

While most companies have a data security policy regarding their end-of-life assets, data security concerns are still prevalent.  Data security concerns are particularly high among companies with a formal ITAD strategy as well as companies who use 3rd party service providers.  Most companies use multiple tactics to alleviate data security concerns, which includes using 3rd party service providers.  However, with nearly 2 out of 3 companies selecting a method such as “Delete the file directory on the hard drive” which does not fully eliminate the potential for data security breaches, there remains some uncertainty as to which methods are truly effective.

With most companies adopting a BYOD policy that allows employees to bring at least one device to work, there has been a dramatic increase in the implementation of policies to ensure that company data on BYOD devices is secure during active use.  The vast majority of companies are also implementing policies to ensure that company data on BYOD devices is eradicated once those devices are no longer active on the company network.

Corporate social responsibility/sustainability has also become increasingly important, with approximately 93% of companies expected to have a program in place by the end of 2015.  Companies who currently have a corporate social responsibility/sustainability program in place typically report their program’s progress in their annual report and/or other forms of corporate communication, both public and private.

The cloud is having a significant impact on the purchase of IT assets, with a majority of companies purchasing more assets to support the cloud.  Some of these additional assets purchased likely include tablets, whose use continues to increase.  As a result, ITAD practices and policies will continue a critical topic among C-suite executives and ITAD Managers.

Details of our survey results can be found in the Arrow IT Asset Disposition Trends Report. To obtain a copy, click here.