John Street – Agilitas Operations Director
Traditionally, purchasing IT stock that would never be used was an unavoidable business cost. Organisations bought IT hardware spares in order to provision for any potential downtime. It was assumed inevitable that some spare parts would remain unused, left to sit on a shelf or even be disposed of. Not only is this unethical, but also costly. In most cases, IT hardware can very easily continue to have a life past an original warranty and even after becoming faulty.
IT providers continuing to purchase IT hardware for spares face significant capital expenditure that can be largely avoidable. Recent Agilitas research estimates IT providers expect to spend as much as 25 per cent of IT budgets on new hardware for spares inventory. This is a concerning waste of money, particularly when you consider so much of the equipment being purchased is going unused.
Unused inventory is a wasted capital expenditure (CAPEX) that can significantly damage an organisation’s return on investment. The money used could alternatively be invested back into the business. Costs can be reduced by repairing and reusing spare parts, and only disposing of them in an ethical manner as a last resort. Especially in the data centre, working with a provider that can reduce costs, can help to focus on the core activity need.
Maximising up-time is one of the highest priorities of IT Managers and it is therefore critical to have access to an extensive parts inventory day and night. Even when initial warranties expire, there are several options to think about to increase equipment life cycles. A good inventory-as-a-service partner will help an organisation make better use of spares, and bring the amounts of parts disposed of, as close to zero as possible. Test rigs are used to reduce dead on arrival (DOA) rates, where parts are delivered to end-users already faulty or failing. The true capability of an inventory-as-a-service partner allows for regular testing in real life environments, where engineers can replicate faults, and make parts ready for use, all of which are key to protecting against failures in live production.
The inventory-as-a-service model, providing security when warranties expire, will significantly reduce an organisation’s CAPEX. Entire systems will not need replacing, and worn down components can just be repaired and reused, rather than thrown away.
Replenishing an inventory to original equipment manufacturer (OEM) standards with Grade A parts is a much more sustainable business model than the alternative. Smaller IT providers, or resellers providing maintenance and inventory services without the support of a larger partner will inevitably incur proportionally more costs, and be less able to service their customers to a two hour 24/7/365 SLA. Parts won’t be able to be tested, nor will the organisation be able to guarantee minimal DOA rates.
Apart from the costs associated with purchasing and supporting an inventory, one significant drag on finances can actually be as simple as space. Too many organisations are storing parts in expensive sought after office space. Recent research by Commercial Property Consultancy Knight Frank revealed office prices in London have risen by 10 per cent in the last year. It is a trend being seen nationwide. As a result, organisations need to be careful about how they use the space they have, especially if it is being used to store expensive and unnecessary IT spares. Combined with the cost of actually buying spare parts, expenditure can quickly skyrocket.
According to our own research almost 40 per cent of IT providers surveyed have more than 10 per cent of their office space taken up by spare parts. If you are one of them, imagine the extra cash injection your business would get if you paid 10 per cent less in rent?
Ignoring the inherent benefits of inventory-as-a-service to provide a superior maintenance service and critically reduce the cost of IT spares by reusing them better, will impact an organisation’s bottom line. The service is an operational cost, rather than an unpredictable and damaging capital one.
By replenishing inventory instead of just disposing with it as soon as something goes wrong, organisations will be taking a much more ethical approach and complying with CSR directives by reducing waste. Lowering the amount of unused IT stock needs to become a priority for the industry, for ethical and business reasons. The facilities to repair and repurpose are there, utilising them will bring benefits to both IT providers and their end user customers.