Extending the life of your IT assets is not always the best way to reduce your IT costs. It's important to balance the value the asset brings to the organization with the cost to purchase, maintain, and dispose the asset. The longer you hold onto the asset, the more likely the asset will fail or be less productive in your organization. The cost of keeping it may be outweighed by the value a newer model device can bring to the organization.
The best way to select the optimal refresh period for your IT assets is to determine the lifecycle with the lowest average annual total cost of ownership that also provides the most value to the organization when the assets are in use.
This is a concept identified by Intel in 2009 and further reinforced in their subsequent study in 2013. The way to look at minimizing your average annual cost for owning a laptop or other IT device is to compare the TCO for that laptop using different refresh cycles and converting each of these refresh rates into an equivalent annual rate (EAR). For example, if the TCO for a laptop on a 4 year refresh is $2,000 and the TCO for that same laptop on a 5 year refresh is $2,600, then the EAR for the 4 year refresh is $500 and the EAR on the 5 year refresh is $520.
Through Cascade's review of the depreciation rates of hundreds of thousands of assets we refurbish and resell each year, we've found that the resale value of these assets generally depreciates at a rate of 3.5% per month. To give you a sense of how this loss in value impacts an asset retired 36 months after purchase compared to 48 months after purchase, we've develop this simple value forecasting calculator.
To use this tool, enter the initial purchase price of your asset. Then enter a depreciation rate (we recommend entering "-3.5" to calculate a 3.5% depreciation rate per month.) Then enter how many months until the item is set for disposal.
Note, the calculator shows the value of an asset sold in Grade A, tested working condition with a warranty. Cascade performs refurbishment and support to help get these values for our clients, and then we share a percentage of this resale value with our customers in the form of a rebate.
Cascade presented more details about IT lifecycle management at the IAITAM show in New Orleans in May 2016. The presentation includes examples of Total Cost of Ownership scenarios and research about asset value depreciation.
Using this information and our internally developed TCO modeling tool, Cascade can provide details about how various refresh rate strategies have an impact on lifecycle costs. Contact us for a free consultation.
