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Market Guide for IT Asset Disposition

Published: 22 November 2016 ID: G00299482

Analyst(s):

Summary

The global IT asset disposition market is marked by continued, rapid consolidation; dramatic shifts in product types and volumes; and growing compliance risk. This Market Guide helps infrastructure and operations leaders identify the right ITAD processes and vendors for their specific requirements.

Overview

Key Findings

  • Infrastructure and operations leaders who manage IT asset disposition (ITAD) continue to struggle with the two big categories of ITAD risk: data security (thorough data sanitization of all data-bearing assets) and proper environmental recycling.

  • The global ITAD market continues to bifurcate into a few very large global providers that increasingly compete with hundreds of credible midsize independent regional providers. And there continues to be a large number of small (often local) providers, some of whose standards and credibility are open to question.

  • The rapid growth of mobile devices and the explosion in the volume and variety of connected Internet of Things (IoT) devices are forcing a re-evaluation of traditional ITAD processes by both users and vendors alike.

Recommendations

Infrastructure and operations leaders tasked with managing ITAD risk:

  • Focus your ITAD process not only on cost (though important) but also on the dual and material risks to your brand equity of ITAD-related data security and environmentally safe recycling.

  • Collaborate with your infrastructure stakeholders — before choosing an ITAD service provider — to identify the ITAD processes and characteristics required for your specific business environment and, for each one, decide whether to "make or buy" (i.e., in-house versus ITAD service provider).

  • Attack now the rapidly growing management and disposition challenge of "IoTAD" — Internet of Things asset disposition — before its data security and disposition risks become overwhelming.

Market Definition

This Market Guide replaces "Magic Quadrant for IT Asset Disposition, Worldwide." It is designed to help IT leaders who are developing their ITAD strategies to assess whether they have the right processes and services to support their specific environment, budget and appetite for risk.

As explained in greater detail in the Market Analysis section, Gartner divides ITAD services into three high-level categories:

  • Core disposition services : A menu of services that are core to all end-to-end ITAD processes and which must be evaluated on a "make-or-buy" decision scale.

  • Acquisition services : The acquisition of used or secondary equipment from ITAD vendors and their partners.

  • Ancillary services : Services offered by full-service ITAD vendors in addition to most of the core disposition and acquisition services.

When using this Market Guide to evaluate the ITAD market and to compare your specific requirements to service provider offerings, your bottom line priority must always be to minimize risks to your brand, specifically the risks of data security (improperly sanitized drives) and environmentally improper recycling.

ITAD service providers have become an important link in the overall life cycle management of IT equipment. The number and complexity of legislative mandates (often country- or region-specific) for the secure and environmentally friendly disposal of IT equipment continue to grow rapidly, and the consequences of noncompliance are quickly attracting board-level attention (see "Hype Cycle for Data Security, 2016" and "Hype Cycle for Sustainability, 2016" ).

Market Direction

The global ITAD industry and its service providers are facing major shifts in the nature of the business, its product mix, and the global compliance requirements of data security and environmental recycling. As the industry's traditional desktop and laptop business continues to slow (see "Invest Implications: 'Forecast: PCs, Ultramobiles and Mobile Phones, Worldwide, 2014-2020, 3Q16 Update'" ), users and vendors are seeing a dramatic shift in disposition demand toward mobile devices and, increasingly, the Internet of Things (IoT). This shift represents both a threat and an opportunity, as new generations of mobile devices generate new data security and recycling challenges but also promise higher back-end residual values from their shorter life cycles.

On the data center side, the trend toward off-premises cloud deployments is putting pressure on traditional data-center-centric ITAD suppliers who specialize in high-end servers, enterprise storage subsystems and network equipment. As organizations migrate more workloads to the cloud, traditional data center ITAD requirements are also shifting from many smaller data centers and being consolidated into the fewer but far larger megacenters of the major cloud-hosting providers (see "The Future of the Data Center in the Cloud Era" ).

Compounding the challenges of this "brave new world" of ITAD will be the IoT and the rapidly growing number of smart devices (see "Hype Cycle for the Internet of Things, 2016" ). Moreover, digital business — the creation of new business designs by blurring the digital and physical worlds — will also have an enormous impact on global ITAD. Digital business promises to usher in an unprecedented convergence of people, business and things that disrupts existing business models. With more than 7 billion people and businesses and more than 20 billion ITO devices expected by 2020 — communicating, transacting and even negotiating with each other — a new world comes into being — the world of digital business (see "2017 Planning Guide for the Internet of Things" ).

With that exploding volume of digital devices and "things" will come the requirement to dispose of those IoT devices securely (that is through robust data sanitization of all data-bearing devices) and in an environmentally safe manner (via compliant recycling).

While ostensibly outside the IT organization's purview and responsibility for disposition, we believe these developments will require a focused, disciplined approach to the two core areas of ITAD risk: data security and environmental recycling.

The global ITAD market continues to consolidate into a few very large global providers that increasingly compete with hundreds of credible midsize independent regional providers.

This is just a small sample of recent consolidation activity in the global ITAD markets:

  • February 2015: Arrow Electronics acquired U.K.-based RDC

  • February 2016: Ingram Micro (CloudBlue) was sold to Tianjin Tianhai Investment., a subsidiary of the Chinese airline and logistics conglomerate HNA Group

  • March 2016: Singapore-based Tes-Amm acquired U.K.-based dataserv

ITAD service providers have become an important link in the overall life cycle management of IT equipment. The number and complexity of legislative mandates (often country- or region-specific) for the secure and environmentally friendly disposal of IT equipment continue to grow rapidly, and the consequences of noncompliance are quickly attracting board-level attention (see "Hype Cycle for Data Security, 2016" and "Hype Cycle for Sustainability, 2016" ).

Market Analysis

We recommend that IT leaders with responsibility for IT asset management (ITAM) and ITAD use the following three categories as a checklist for tracking "make or buy" decisions about each category's associated tasks. For each ITAD task, they should evaluate whether it applies to their environment and, if it does, whether it is best handled internally or outsourced to a specialist ITAD service provider.

Core Disposition Services

The activities generally associated with the removal and disposal/disposition of IT assets are listed here in typical chronological order. Most ITAD vendors offer to perform some or all of these activities with varying degrees of efficiency and at varying costs. IT leaders responsible for ITAD must understand their specific requirements and prioritize them against these comprehensive ITAD services to optimize the negotiation of an effective ITAD contract that meets their financial, geographical, security and risk requirements.

All of the following activities must be performed to dispose of IT assets properly, but many (including deinstallation, collection and on-site packing) are often accomplished using internal resources. The three most important tasks to execute correctly, and to which ITAD executives should pay special attention, are data sanitization , transportation logistics and recycling . These three tasks represent the greatest risk in the ITAD process, and should be handled by an experienced, well-vetted ITAD service vendor.

  • Deinstallation. This task includes all activities associated with the physical removal of hardware and software from the existing site in preparation for packing and shipment; an example is software harvesting (see the Ancillary Services section, below). These activities can be labor-intensive and may require specific packaging to preserve the condition of the asset and any remaining remarketing value. Although most ITAD vendors offer deinstallation, our research indicates that these activities are typically handled by in-house personnel as part of their organization's standard ITAM process.

  • Collection and bin rental. Weather-proof bins or lockable storage areas are often used to segregate and accumulate IT assets for disposal, and should be secured to prevent theft. In addition, it may be necessary to provide a staging area or storage room for asset packaging and shipment.

  • On-site packing. If space is available at the customer's site, on-site packing offers greater security and protection for resalable assets than transporting unpackaged equipment to an alternative, off-site packing area. However, packing must be done properly to minimize the risk of in-transit damage and the consequent effect on the equipment's resale value; indeed, to minimize this risk, many organizations have the ITAD vendor do the on-site packing. At this stage, security ID tags or serial numbers should be assigned for chain-of-custody tracking and control.

  • Transportation logistics. There can be significant security and cost advantages to having an ITAD vendor handle transportation logistics from the customer's site to the vendor's processing facility. However, ITAD managers must ask questions to gain a clear understanding of the vendor's precise transportation process and logistics. For example, is the vehicle sealed and tracked? Will the asset shipment go straight from the user's site to the vendor's, or will there be subsequent collections from other clients, or an overnight stop en route? Does the ITAD vendor use its own vetted employees and fleet of trucks, or multiple third-party carriers? If the latter, do these carriers specialize in IT-specific assets, and have their employees been through rigorous and routine background checks that extend beyond the initial hiring? Depending on the answers to such important chain-of-custody questions, different logistic risk profiles will emerge.

  • Theft protection (in-transit insurance). Although retired equipment may often have only minimal scrap value, insurance coverage is still important to manage security and environmental compliance liabilities.

  • Data sanitization and hard-drive destruction/shredding. Whether used equipment is deinstalled for redeployment within the enterprise; for external refurbishing and resale; or for ultimate disposal, component recovery and recycling, data sanitization or actual hard-drive destruction/shredding are crucial activities to ensure compliance with both internal and external privacy and security requirements. The specialized software and appliances required for this process are often most efficiently and effectively used by an experienced ITAD vendor, which should provide certification that the data was sanitized to common industry standards — such as the U.K.'s ADISA (Asset Disposal and Information Security Alliance) or the U.S.'s National Institute of Standards and Technology (NIST) Special Publication 800-88. To minimize chain-of-custody security risks (such as the risk of loss in transit from the customer's site to the ITAD vendor's facility), a growing number of ITAD managers (especially in the financial and healthcare sectors) require that some form of data sanitization (or physical shredding if the drive cannot be properly wiped) be performed on-site, before the asset is removed from the customer's premises. Organizations not requiring on-site data sanitization should, at a minimum, enforce data encryption on all data-bearing devices to minimize chain-of-custody security risks.

  • Remarketing/resale. One of the primary functions of ITAD vendors, remarketing/resale is the main source of revenue for most organizations and many ITAD vendors. Indeed, it is the critical denominator in the core ITAD cost-benefit equation, and often determines whether the vendor writes the client a check or sends an invoice. (This obviously also depends on the equation's numerator: the extent and cost of the ITAD services being rendered.)

  • The organization's remarketing revenue will depend on many factors, among them the type, age and condition of the asset; the ITAD vendor's remarketing network, experience and contacts; the percentage returned to the client (typically 60% to 70%); and the general market conditions. ITAD executives should be aware that this reimbursement percentage is just one of two important variables in the remarketing equation.

  • They must also understand how the "net proceeds" of the asset sale (against which this percentage is applied) are calculated. What costs and fees are deducted from the gross resale proceeds? We have seen many cases where 60% of fair net proceeds is actually higher than 70% of an unjustifiable low net. Buyer beware!

  • Recycling and component recovery. This crucial "demanufacturing" function reclaims any serviceable components and recycles any raw materials from the asset, in compliance with local and national regulations. An important ITAD task that should minimize risks to brand equity, this task and data security are the two core drivers of a formal ITAD process. Indeed, the growing visibility of corporate social responsibility — especially in large multinational organizations — is driving requirements for zero-landfill and zero-incineration solutions, and for data on recycling to appear in the annual report.

Acquisition Services

As a natural outgrowth of their asset disposition business, many ITAD vendors also offer customers the opportunity to acquire used equipment, often to replace disposed assets.

  • Trade-in management. Management of replacement assets as part of the standard asset life cycle

  • Service provisioning. Services associated with warranties provided as a part of the acquisition and support services provided independently of the acquisition

  • System imaging. System imaging services for server and PC and mobile assets (must be licensed to do this)

Ancillary Services

Some services are considered ancillary to the core ITAD business of asset disposition, and not all ITAD vendors offer all of them. ITAD managers should consider each as an optional service that may or may not add material value within their specific environment.

  • Software harvesting. Specialist software tools can help identify the software licensed with an asset that may still have value and can be removed. This allows licenses to be redeployed elsewhere within the customer's organization. If required, the ITAD vendor may also help to ensure that any remaining data is backed up and returned to the end user prior to secure deletion of all data on all storage media.

  • Warranty look-up and provisioning. Determination of remaining OEM warranty and/or provision of extended warranty coverage.

  • Lease return management. Assistance for clients in relation to lease return logistics such as proper deinstallation to ensure ongoing maintenance eligibility, packaging, condition assessments, shipping and data cleansing.

  • Charitable donations and sales to employees. Assistance for clients in preparing assets for charitable donations or sales to employees (packaging, value determination, shipping and data cleansing, for example). Security and compliance concerns are fueling a trend away from both of these disposition alternatives.

  • Redeployment. Assistance with internal redeployment of client assets (for example, deinstallation, inventory, data cleansing, packaging, shipping, unpacking and installation).

Representative Vendors

The vendors listed in this Market Guide do not imply an exhaustive list. This section is intended to provide more understanding of the market and its offerings.

A fundamental difference between Gartner's Magic Quadrant and a Market Guide is the decision about which vendors to profile. Because the Magic Quadrant has a formal research and ranking methodology, it also requires specific inclusion and exclusion criteria. Not so for the Market Guide, which specifically states that this is a "representative" sample of a variety of vendors in the ITAD market. As such, we have tried to profile a mix of large service providers with a strong global presence and smaller, more local — though nonetheless credible — suppliers of a variety of ITAD services.

The range of vendors reviewed here will interest a wide variety of organizations with diverse requirements, from geographically specific ITAD services to truly global solutions. In our selection, we have tried to satisfy the needs of both multinational clients looking for a single global provider and clients looking for a more regional provider.

Apto Solutions

Based in Atlanta, Georgia, U.S., Apto Solutions was founded in 2001, is privately held and has over 140 direct ITAD employees. ITAD is Apto's only line of business, and Gartner estimates its current revenue run rate at $70 million to $80 million. Apto's ITAD business and facility infrastructure is highly North America-centric, with about 70% of its revenue derived from North America and the remaining 30% split evenly between EMEA and Asia/Pacific (APAC). Apto has about 140,000 square feet of ITAD processing space, spread over its three owned and operated U.S. ITAD processing facilities in Atlanta, Georgia; Austin, Texas; and Milpitas, California. All three are certified for ISO 9001, ISO 14001, and OHSAS 18001, as well as for both R2 and e-Stewards.

To deliver on international (non-North American) projects, Apto uses a hybrid model of direct and indirect ITAD services, which generally involves sending a project team of Apto employees (typically, one to five) to customers' sites to manage a local support team and work with logistics and recycling partners. While this hybrid model gives Apto the capability to deliver ITAD services globally, its highly North America-centric infrastructure (three processing centers, 140 employees and primarily U.S.-based revenue) makes it a better choice for North America-centric organizations.

Apto has particular expertise in complex, enterprise-class ITAD projects (such as data center refreshes and consolidations), and has good technical and remarketing expertise to process and sell complex data center systems such as high-end storage systems, telecommunications equipment and enterprise servers. It also has growing expertise in mobile device and computer reverse logistics, and repair/refurbishment services, having contracts with several large U.S. carriers and OEMs.

An often overlooked but important part of service delivery — the customer portal and asset tracking system — is one of Apto's strengths. Its AptoPulse portal is a robust, automated global asset tracking and reporting system that provides close to real-time access and full visibility into the end-to-end disposition process, from receipt to final sale, destruction, redeployment or recycling.

Arrow Electronics

Arrow Electronics, based in Colorado, U.S., is a $23 billion global electronic product and service company that has acquired a major presence in the global ITAD market, specifically throughout the U.S. and European markets, and whose combined global footprint totals about 1.5 million square feet (split about equally between the U.S. and Europe). It has consolidated its North American owned and operated facilities to about 800,000 square feet spread over five facilities distributed across the U.S. In Europe, it has expanded its ITAD footprint significantly (most notably with the February 2015 acquisition of U.K.-based RDC), and now has about 750,000 square feet across 10 facilities (its two U.K. facilities represent about half of its European footprint).

Its APAC ITAD business is executed through a number of local partners, as it owns only a single, 5,000-square foot facility in Singapore. We believe Arrow's long-term strategy is to develop an owned and operated presence in Asia/Pacific as well.

Arrow has certified most of its global facilities for ISO 9001, ISO 14001, ISO 27001, OHSAS 18001, R2, and U.K.-based ADISA.

Arrow's substantial global presence, resources and infrastructure give significant credibility to its long-term strategy of being a major global ITAD service provider. Moreover, we believe that over time Arrow will leverage its ITAD services expertise and expand "upstream" into the managed services space, with the ultimate goal of being an end-to-end provider of IT infrastructure, from procurement to ongoing operations to disposition.

Atlantix Global Systems

Based in Norcross, Georgia, U.S., Atlantix Global Systems is a well-established dealer in new and used equipment that, through a growing network of international partners, has become a global ITAD vendor. In October 2015, Atlantix was acquired from Presidio by private equity firm Millstein & Co., a diversified investment management and financial services firm. Atlantix's 40-year heritage and core expertise are in extracting maximum residual value out of all types of IT assets, from PCs to enterprise-class data center assets such as servers, storage and networking kit. About 60% of its retail and wholesale ITAD revenue of $90 million to $100 million (Gartner estimate) is derived from North America, with the remainder coming from EMEA (30%) and APAC (10%). With 150 employees and about 1,900 active clients, Atlantix's U.S. operations are centered around its two Georgia facilities (a total of 128,000 square feet), both of which are certified for ISO 9001, ISO 14001, OHSAS 18001 and R2.

Users looking to maximize the residual market value of their used IT hardware assets should evaluate Atlantix's robust global remarketing process and infrastructure.

While Atlantix is strong in its core competency of refurbishing and remarketing IT assets on a global scale, users disposing of a preponderance of older assets (that is, more than five years old for nontelecom kit) should also consider other ITAD vendors whose core expertise lies in equipment recycling. With both of its owned and operated facilities located in Georgia, Atlantix is highly dependent on its global partner network to deliver nonremarketing ITAD services.

Cascade

Cascade was founded in 1999 and is headquartered in Madison, Wisconsin. One of the smaller ITAD vendors in this Market Guide, Cascade has about 70 employees and current ITAD revenue of $10 million to $15 million (Gartner estimate). Cascade is focused primarily in North America, with its 60,000 square feet of owned and operated ITAD processing capacity spread over its Madison, Wisconsin headquarters and its Indianapolis, Indiana facility. Both U.S. facilities are certified for ISO 9001 and ISO 14001, NAID AAA and e-Stewards. While Cascade supplies ITAD services to many diverse industries, it has extensive experience supporting the complex compliance requirements of the regulated healthcare industry. Cascade covers the full gamut of IT equipment (e.g., desktops, laptops, printers, servers, storage and networking kit), with a secondary competency in mainframe servers, enterprise-class storage systems and telecom equipment.

As a family-run regional U.S. ITAD player, Cascade has strong chain-of-custody processes, and uses its own vetted security staff and vehicles for most of its transportation logistics. While its ITAD coverage is largely limited to the U.S. and Canada, it has a good customer reputation for integrity and stability.

Curvature

Headquartered in Santa Barbara, California, Curvature (formerly Network Hardware Resale) is a $300 million (2015 revenue) IT services company specializing in networking equipment and services. It has recently expanded its networking heritage to include data-center-centric assets (e.g., enterprise storage and servers), and is becoming a viable player in networking and data center ITAD. While its core specialties are centered around its robust (over 500 stocking locations), global (six countries) hybrid (new and used) network and data infrastructure, and third-party maintenance offerings, we believe it should also be considered as an alternative ITAD service supplier for networking and data center infrastructure.

Curvature has three owned and operated ITAD facilities, one in each major geography: in Santa Barbara, its California headquarters (56,000 square feet), in Amsterdam (19,000 square feet), and in Singapore (about 12,000 square feet). These facilities are ISO 9001-, ISO 27001- and TL 9000 (telecom)-certified; and its Santa Barbara facility is expected to be R2-certified by YE16. In 2017, Curvature expects to expand it APAC presence with a modest ITAD facility in India.

Dell Technologies

Founded in 1984 and based in Texas, U.S., Dell Technologies is a global technology company with fiscal 2016 revenue (ending January 2016, prior to the EMC acquisition) of $54.9 billion that sells and supports computers, and related products and services. Dell's ITAD service business is a relatively small part of its global business (less than $100 million in annual revenue by Gartner's estimate), and is delivered exclusively through a global network of Dell Environmental Partners (that is, Dell itself does not own or operate any ITAD processing facilities). The majority of Dell's ITAD revenue is generated in North and South America, but it has a robust partner capability in all major geographies except the Middle East.

Dell has a robust and globally consistent network of well-vetted and regularly audited ITAD partners that deliver a high-quality portfolio of ITAD services. Vendors and users indicate that Dell's ITAD standards and vetting/auditing program can be considered a superset of those of most ITAD certification bodies.

Since Dell was taken private in October 2013, our research indicates that Dell's management team has understood the central importance to its global brand of maintaining a robust ITAD back end to its global hardware business, and that it remains committed to doing so. While Dell's dramatic September 2016 $67-billion acquisition of enterprise storage vendor EMC has been a management resource drain, we believe it also opens up significant enterprise data center opportunities for Dell's ITAD business. Indeed, while Dell's primary targets for its ITAD services continue to be existing Dell customers, and its primary underlying objective remains facilitating the deployment of new Dell Technologies solutions, products and services, we believe those services will expand "upstream" from basic ITAD to include more end-to-end managed services offerings.

ERI

ERI (Electronic Recyclers International) is a California-based ITAD service provider that is minority owned by Alcoa (U.S.) and LS Nikko Copper (South Korea). With 2016 ITAD revenue projected to be over $100 million, ERI is a major player in the North American ITAD market. It has one of the largest owned and operated ITAD processing footprints in North America, with eight processing facilities (totaling about 1 million square feet) that are well distributed across the U.S. and are certified to the ISO 9001, ISO 14001 standards and both e-Stewards and R2 standards. In addition, five of ERI's largest facilities are also NAID AAA-certified, and the remaining four facilities are scheduled for AAA certification in 1H17.

Whereas some ITAD suppliers outsource the back-end recycling component of the ITAD process, one of ERI's distinguishing features is its in-house shredding technology that can demanufacture about 100,000 pounds of components per hour. The resulting commodity streams are then shipped to ERI's downstream smelting partners (and minority owners): Alcoa and LS-Nikko Copper.

While ERI's revenue and customer base are heavily North America-centric, it has an extensive network of global ITAD partners, enabling it to deliver ITAD services globally.

ERI's customer portal and tracking system, MyTrackTech is a customizable dashboard that tracks assets throughout the entire ITAD process.

HiTECH

HiTECH is an Oklahoma City-based ITAD service provider with revenue in the $15 million to $20 million range derived exclusively from North America (U.S. and Canada). Its approximately 100 employees are distributed across its three U.S. ITAD processing facilities (totaling about 78,000 square feet), with the greatest concentration at its Oklahoma City headquarters (64,000 square feet). In 2017, HiTECH plans to grow its ITAD footprint by about two-thirds to roughly 130,000 square feet by doubling its Memphis, Tennessee site square footage to 25,000 square feet and opening a roughly 40,000-square foot ITAD facility in Baltimore, Maryland. HiTECH is also in final negotiations for a strategic ITAD services partnership with a major data center colo provider which promises to expand its ITAD capacities significantly.

Both its Oklahoma City and Memphis facilities are certified for ISO 9001, ISO 14001, OHSAS 18001, RIOS and R2.

HiTECH has a robust, built-for-purpose, fully integrated customer portal and asset tracking system (TrackIT) that allows close-to-real-time end-to-end tracking of customer assets, data sanitization, environmental status, and third-party integration.

While HiTECH services only North America, it has a strong, experienced management team that is active in the ITAD industry.

HPE Financial Services (HPEFS)

Hewlett Packard Enterprise's ITAD services are delivered through HPEFS, its financial services business unit. It offers integrated, prepackaged services, covering a broad range of ITAD requirements, to both small and large organizations. HPE has an extensive network of global ITAD service partners because its owned and operated ITAD processing services are limited in the U.S. to its 180,000-square foot facility in Andover, Massachusetts, and in Europe to its 138,000-square foot facility in Erskine, Scotland.

Since October 2014 when HP split into Hewlett Packard Enterprise (HPE) and HP Inc., HPEFS entered into a long-term operating agreement with HP Inc., which allows HPEFS to continue its ITAD support of HP Inc., in effect continuing business as usual between the two entities.

Reflecting the product mix and customer base of both entities, HPE's ITAD business is principally focused on the PC (desktop and laptop) and enterprise storage, server, and networking markets. That said, while not yet a large part of its ITAD business, HPEFS is aggressively targeting the rapidly growing mobile device market as well.

HPEFS delivers full, end-to-end ITAD services that support customers in all world regions. While a core objective of HPE's ITAD services is to facilitate deployment of new HPE/HP Inc. solutions, products and services, it also provides significant ITAD services for non-HP equipment that is unrelated to any sales of new HPE/HP Inc. equipment (in data center liquidations, for example).

HPE's ITAD services are part of a comprehensive, end-to-end portfolio of services spanning hardware, software and finance, regardless of equipment type or age. HPE's worldwide presence is viewed as a significant benefit by many multinationals, with a significant global commitment to HP products and services.

As with most major OEMs, HPE's ITAD services can be used in conjunction with new equipment acquisitions; in fact, proper disposal of replaced equipment is a requirement under the European Union's Waste Electrical and Electronic Equipment (WEEE) directive.

IBM

For demanufacturing, disposal and scrapping, IBM's Global Asset Recovery Services unit (GARS — part of IBM's Global Finance) follows what is effectively a mixed outsourced model. Of the 20 ITAD processing facilities (over 1 million square feet) that IBM uses to execute its global ITAD business, 15 are operated by its global logistics partner, which manages the day-to-day execution of most of its demanufacturing and disposition suppliers. The remaining five locations are operated by IBM directly. While IBM's employee presence varies by site, it maintains a complete set of matrixed controls at each location to ensure its ITAD processes are applied consistently.

IBM's GARS business unit's fundamental charter is to support the overall interests and objectives of IBM. Historically, this has meant that GARS typically did not target non-IBM equipment unless there were indications of follow-on sales of IBM equipment. Our recent research indicates that IBM has recognized the inherent value and revenue potential of its significant global ITAD infrastructure, logistics and partner network, and is actively expanding its investment and commitment to become a major, asset-agnostic player in the global ITAD market. Specifically, our research indicates that IBM's GARS ITAD business — outside of its traditional lease and IBM internal returns business — has more than doubled every year for the past four years, with a proportional increase in its ITAD workforce as well. While this recent torrid growth rate is admittedly likely off a relatively small base, we believe it is a good indicator of IBM's commitment to leveraging its robust global ITAD infrastructure and logistics to specifically focus on non-IBM equipment and become a global ITAD player for all brands.

For organizations with a significant existing commitment to IBM products and services or a need for PC or mobility equipment disposition, the company's pervasive global presence and strong global services capabilities make it a logical candidate to supply ITAD services. IBM regularly audits the many global facilities of its ITAD partners for compliance with IBM's ITAD processes and standards.

The core value proposition underlying IBM Global Financing and the GARS offerings is end-to-end management of the asset life cycle. Typically, the stronger the relationship with IBM, the greater the synergy and customer value will be.

Ingram Micro (CloudBlue)

Irvine, California-based Ingram Micro, a wholesale technology distributor and supply chain services and logistics provider, acquired U.S.-based ITAD service provider CloudBlue in September 2013. Ingram Micro believes that among its core differentiators is its robust BlueIQ asset tracking and intelligence system, as well as its strong on-site services (including data sanitization).

About $1 billion of Ingram Micro's $46 billion total revenue is derived from its Lifecycle Services business unit, which is a superset of its ITAD-focused disposition services. While we expected Ingram Micro to leverage its global presence (more than 130 facilities worldwide) by aggressively expanding CloudBlue's North America ITAD success globally, until recently we have not seen much evidence to that effect (currently about three-quarters of its ITAD revenue is derived from North America).

That appears to be changing rapidly; by year-end 2016, Ingram Micro plans to have opened a total of about 48,000 square feet of converted space in France, Germany, the Netherlands, China, India, and Singapore, as well as additional facilities in Europe and APAC in 2017. It should be noted that because these ITAD facilities are located within a total of about 1 million square feet of Ingram Micro (reverse) logistics and repair facilities, it has ample room to rapidly expand its ITAD processing capacity.

The recent big news for Ingram Micro and its ITAD business unit, CloudBlue was announced in February 2016, when it agreed to sell itself for about $6 billion to Tianjin Tianhai Investment Co., a subsidiary of the Chinese aviation, tourism, and logistics conglomerate HNA Group. Recently (1 November 2016), the deal was cleared by the Committee on Foreign Investment in the U.S. (CFIUS), and the companies are confident that it will close by year-end 2016. Ingram Micro indicates that the acquisition represents only a change in equity ownership, that they plan to continue as a stand-alone company led by its current leadership, and that by joining HNA's portfolio they expect no change in the way Ingram Micro does business.

Ingram Micro indicates that it will continue using the well-recognized CloudBlue brand in the U.S., while using its own Ingram Micro brand as it expands outside North America.

Iron Mountain

Iron Mountain is a $3.1 billion global storage and information management services business headquartered in Boston, Massachusetts. Over the past four years, it has had a symbiotic partnership with Ingram Micro's CloudBlue, whereby Iron Mountain customers leverage its strong reputation for secure chain-of-custody logistics and data security, with CloudBlue providing reputable back-end ITAD services.

While the theory is compelling, the business has as yet not gone far. Iron Mountain currently has about a $10 million ITAD business, primarily based in CloudBlue's home territory, the U.S. That said, we believe ITAD is now getting senior Iron Mountain attention and resources, as is evidenced by its growing North America and U.K. ITAD business, and its anticipated offerings in Europe and Australia over the next six months (by 1Q17).

Iron Mountain's "Secure ITAD" (SITAD) business is part of its Data Management Services business.

Bottom Line : For users currently exploiting Iron Mountain's robust global information management and logistics services, it may make sense to investigate its growing (S)ITAD offerings.

ITRenew

ITRenew was founded in 2001 and has since grown rapidly in terms of revenue (Gartner estimates $70 million to $80 million in 2015 and projects more than 20% growth in 2016), customers (over 300), and employees (over 275).

ITRenew has largely focused on refreshing data center infrastructure, and has had significant success with many of the world's major data center players. With its significant concentration of very large data centers in North America, ITRenew's revenue are highly (approximately 90%) North America-centric.

Like its revenue, ITRenew's owned and operated ITAD facilities are also concentrated (almost 90%) in North and South America (about 300,000 square feet of its global 340,000-square foot total, which includes its growing 20,000 square-foot Sao Paulo, Brazil facility). All but one (Las Vegas, Nevada) of its seven North and South American facilities are certified for R2, ISO 9001, ISO 14001 and OHSAS 18001. While it has a small European (roughly 20,000 square feet) and Japanese (15,000 square feet) footprint, its partnership with Tes-Amm delivers most of its EMEA and APAC coverage.

One of ITRenew's core strengths is its own robust, in-house-developed, proprietary data sanitization software, Teraware, for hard-disk drive (HDD) and solid-state drive (SSD) storage systems. Our research indicates that Teraware has been identified by several large customers and storage OEMs as a competitive differentiator, especially for data-center-class enterprise storage assets and on-site data sanitization.

Although enabling the company to be agile and responsive, ITRenew's relatively small size also poses key resource triage challenges — especially given its business strategy of pursuing global growth through facilities that it owns and operates.

ITRenew's continued rapid revenue growth (projected to be about 25% in 2016) and geographical expansion will pose a significant challenge to its management team's efforts to maintain the quality and consistency of its global ITAD service delivery.

Procurri

Singapore-based Procurri is a relatively new and different entrant into the ITAD space. Founded in 2012, it has grown rapidly, with 2015 global revenue in the $90 million to $100 million range, and a growth rate in the mid-20% range (Gartner estimates).

With seven owned and operated processing facilities in the three major geographies totaling about 250,000 square feet, as well as access to an additional 12 facilities of vetted partners, Procurri has a reasonably robust global presence.

Procurri considers itself more of an "aggregator" of global enterprise hardware and services than a straight ITAD service provider. Its focus is almost exclusively on high-end data center equipment (e.g., enterprise servers and storage, and networking kit). Its business strategy is to leverage the used equipment sourced from its data center-centric ITAD business and add its expertise in logistics, system integration, installation and maintenance to deliver complete computing solutions. This "converged infrastructure" approach (e.g., compute, storage and network) gives them a different value proposition than most ITAD service providers. Procurri views ITAD as a source of used IT equipment with which it can build complete "load and go" solutions (e.g., delivering a configured, tested private cloud using preowned IT assets sourced from its ITAD business).

Sage Sustainable Electronics

Founded only three years ago by ex-Redemtech (now Arrow) executives, Columbus, Ohio-based Sage Sustainable Electronics indicates it has over 100 employees generating revenue in the $10 million to $20 million range, which is expected to more than double by YE17 (Gartner estimate). Sage's revenue are almost exclusively from North America, and over 20% come from life cycle services such as redeployments, lease returns, donations and legal holds. Sage has over 100,000 square feet of ITAD processing capacity spread over three owned and operated facilities in Baltimore, Maryland; Reno, Nevada; and its Columbus, Ohio headquarters. All three facilities are currently ISO 9001-, ISO 14001-, and OSHAS 18001-certified, as well as Microsoft Authorized Refurbishers (MARs); Sage expects all three facilities to be e-Stewards-certified in 2017. In September 2015, Sage's largest shareholder, recycler Hugo Neu Corporation, sold its Hugo Neu Recycling subsidiary to Sage, giving it access to Hugo Neu's New Jersey-based logistics team and owned trucks.

As its name suggests, Sage's focus is on extending reuse and delaying the recycling of IT equipment. An interesting tool it has developed to deliver on this promise is its "BlueBook," a database of current market data on IT equipment sales transactions that gives insight into the market value of a wide range of IT assets. Sage indicates it currently contains about 40 million records. While users can potentially leverage this data to better time refresh cycles and optimize IT asset values, historically it has been notoriously difficult to develop and maintain accurate estimates of the global used-IT equipment market.

While still a very young, though rapidly growing, U.S.-centric ITAD vendor, Sage's value proposition is focused on creating longer useful life for IT equipment while delivering the consequent higher-than-average returns on processed IT assets. While still in its early days, Sage's approach may merit investigation for users looking for more reuse and less recycling.

Sims Recycling Solutions

Founded in the U.K. in 2002 as a wholly owned subsidiary of Australia-based Sims Metal Management (which reported AUD$4.6 billion, USD$3.5 billion in revenue for fiscal year ending June 2016), Sims Recycling Solutions' headquarters is in the U.K. It is among the world's largest electronics recyclers, with facilities in 17 countries totaling over 3 million square feet, split roughly two-thirds in EMEA, one-quarter in the U.S. and the remainder in APAC. Sims entered the ITAD business in 2005 and currently has annual global ITAD revenue of approximately AUD$725 million (USD$550 million) — split between North America (40%), EMEA (40%) and Asia/Pacific (20%), according to Gartner estimates. In moving more toward ITAD, its North America footprint has contracted by about half over the past two to three years, as it has jettisoned about 800,000 square feet in four of its U.S. and all three of its Canadian facilities. That said, its U.S. facility footprint remains robust, with over 800,000 square feet spread over its seven remaining facilities — all of which are R2-certified.

Sims' core strength is its global scale and reach as a single-source global supplier of recycling services using its owned and operated processing capacity. That said, the core back end to its recycling heritage of commodity metals pricing has continued to decline precipitously, forcing a significant shift in Sims' focus and business model. Though still a major global recycling player, Sims is increasingly focused on value-added services around the ITAD space, even reaching "upstream" into a more consultative role. We are seeing Sims engaging earlier in the asset life cycle, informing decisions about optimal refresh cycles by asset and geography, and maximizing back-end equipment value at the asset, component and metal level. Indeed, Sims appears to have made significant progress in integrating its internal business segments (asset recovery, recycling, life cycle services and others) to deliver a coordinated global services model.

Sims is well-known for its strong and globally consistent environmental recycling processes and standards, and counts many other ITAD vendors as wholesale customers.

Tes-Amm

Tes-Amm, majority owned by Navis Capital Partners since May 2013, was established in Singapore in 2005 and has since grown rapidly to become Asia/Pacific's leading supplier of ITAD and e-waste recycling services. Gartner estimates that Tes-Amm's annual revenue is in the range of $140 million to $150 million. Its customer base is mainly composed of IT OEMs and service companies, contract equipment manufacturers, waste management organizations, leasing companies, public sector and government organizations, and multinational corporations.

While Tes-Amm's core heritage and strength has been its relative dominance of the APAC ITAD and recycling market, its many multinational clients have been pressuring it to get into other geographies. In March 2016, it made a significant move to expand its global footprint and presence with its acquisition of U.K.-based dataserv, which immediately gave Tes-Amm a strong European footprint, as well as an initial toehold in the U.S. (dataserv had run out of resources to grow its relatively small U.S. business). Indeed, with dataserv's relatively strong European presence, Tes-Amm's longer-term challenge will be how to grow its relatively minor physical presence in the highly competitive U.S. ITAD market (most likely by further acquisition).

Tes-Amm now has an extensive network of 33 owned and operated ITAD facilities in 22 countries covering all three major geographies (though APAC still dominates). All of these facilities are certified for ISO 9001, ISO 14001, and OHSAS 18001, and it has R2-certified facilities in the U.S. and throughout APAC, as well as ISO 27001, ISO 28000 and TAPA certification in key sites. Although Tes-Amm has certified partners that supply ITAD services in other regions, we expect it to continue to grow its global footprint of owned and operated facilities, particularly in the U.S. based on its global customer set.

Tes-Amm is expecting to leverage and standardize globally on dataserv's robust Oracle-based portal and asset tracking and reporting system DARRS as its global standard, and will be rolling it out to its APAC sites in early 2017.

Market Recommendations

Before evaluating the market and its vendors, ITAM and ITAD executives should perform their own detailed due diligence by evaluating and identifying their ITAD priorities and business and geographical requirements. Only then should they examine the ITAD service offerings of specific vendors and compare them with their requirements to draw up a shortlist of vendors.

This is especially important when evaluating a solution for global ITAD services. ITAM and ITAD executives should consider these two main approaches when contracting for global ITAD services, and determine which option is more appropriate for their company's culture and organization:

  • Sole-source supplier for all geographies. This approach transfers ultimate responsibility for global ITAD coordination and process standards to a single vendor. Note that no vendors deliver global ITAD services without using at least some partners. Therefore, the extent to which they use partners is an important matter. Current choices range from large global players like Arrow and Sims, who deliver much of their ITAD processing services through facilities that they own and operate, to Dell, which neither owns nor operates any ITAD processing facilities but has a robust process for vetting and regularly auditing partners — which enable it to deliver a broad spectrum of ITAD services.

  • Best-of-breed supplier by major geography (North America, South America, EMEA, Asia/Pacific). This approach acknowledges that most ITAD suppliers have a "home" advantage and are strongest in their native geography, often outsourcing ITAD support and services to other specialists in other geographies. For a client organization that is already highly segmented by geography, this may prove the most efficient approach, with global ITAD managed as the enterprise is organized — by major geography. Such a more localized approach can also help deal with the maze of different regulations in different geographies. This is not to say that adopting a best-of-breed approach by major geography will necessarily result in three to five different ITAD suppliers, one per geography. Depending on the requirements, the same ITAD vendor may be chosen in multiple geographies. Our research indicates that a three- to five-geography RFP will typically yield one to three winning vendors, with one or two ITAD providers winning in multiple geographies. Although a potential drawback to this approach is the need to manage multiple vendors in different regions, it can nevertheless be a good choice for multinationals that are already organized by major geography. We believe the best-of-breed approach should at least be considered, with the understanding that requirements may ultimately necessitate a sole-source supplier for all regions.

Evidence

For this Market Guide, from April-November 2016 we evaluated information from a wide range of sources, among them:

  • Detailed questionnaires completed by all 16 vendors profiled in this Market Guide

  • 1-on-1 briefings with all 16 ITAD vendors profiled

  • Many discussions about ITAD market issues and ITAD vendors with users of Gartner's client inquiry service

  • Many ITAD certification and standards bodies (e.g., R2, e-Stewards, and NIST)

  • Basic research on vendors' details sourced from Hoover's, S&P Capital IQ and OneSource

  • Research by an extended team of Gartner analysts who also collaborated on and vetted findings

  • Gartner's market research, such as:

    • "Invest Implications: 'Forecast: PCs, Ultramobiles and Mobile Phones, Worldwide, 2014-2020, 3Q16 Update'"

    • "Hype Cycle for Data Security, 2016"

    • "Hype Cycle for Sustainability, 2016"

In addition, all the vendors were given the opportunity to review a draft of their section of the Market Guide for factual accuracy.