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The Circular Economy for Enterprise Computing Gear is Evolving

CIOs can now find high-performance computing equipment, six-figure cost savings, warranties, support contracts, sustainability, and an answer to supply shortages. But will reused IT gear catch on?

As businesses look for ways to reduce their carbon footprint and boost sustainability, an age-old idea is bubbling to the forefront: participating in the circular economy (CE). By reusing, repairing, repurposing, refurbishing and reselling things it’s possible to trim emissions, reduce waste, save money, and achieve strategic benefits.

The idea of ditching today’s buy and toss mentality is gaining momentum. An August 2020 report from Gartner, Inc. found that 51% of supply chain professionals see circular economy strategies are on the increase. While much of the focus in IT was initially on high performance computing systems, the circular economy is expanding to encompass a broad spectrum of systems and devices.

“As companies look to become carbon neutral, the circular economy enters into the picture,” states Autumn Stanish, associate principal analyst at Gartner. “It presents enormous opportunities for both large and small organizations -- and across supply chains.”

Net Gains in Circular Economy

The need for a more sustainable business framework isn’t up for debate. The World Economic Forum reports that 50 million tons of electronic and electrical waste (e-waste) are dumped into the environment every year. Without further action, the volume of waste will reach 120 million tons annually by 2050.

Amid growing concerns about the impacts of climate change and the need to manage IT resources more strategically, circular economy concepts are rapidly gaining momentum. An October 2021 report from the United Nations and Accenture found that 57% of CEOs are focusing on targets set by the Paris Agreement and 74% say they are deploying CE models that minimize carbon output.

In reality, CE initiatives intersect with both ESG programs and digital transformation efforts. Maximizing value-retention processes can result in up to a 95% reduction in carbon emissions, says Jennifer Russell, an assistant professor at Rochester Institute of Technology. It can also establish a more efficient IT lifecycle framework. “Companies have a huge opportunity to reconsider how value is created, distributed, and captured, and how to integrate related environmental and social value into their business model,” she says.

When companies execute on the concept effectively, they’re able to maximize product lifecycles and establish a more efficient value chain. CE can involve buying, selling, and donating used servers, PCs, and peripherals. It also can focus on refurbishing and repairing existing gear to eke out a longer lifespan.

In fact, “Re-use has the potential to be the most impactful sustainability trend in the data center industry,” states Lucas Beran, principal analysis at Dell’Oro Group.

The World Economic Forum found that CE business models produce measurable gains for organizations across the full spectrum of industries. “The benefits of a circular economy are not merely operational but strategic,” it reported. In practical terms, the cost savings associated with purchasing refurbished high-performance computing systems can amount to six or even seven figures. Among standard servers and PCs, a savings of 20% to 40% isn’t unusual, Stanish says.

It’s an approach that makes sense -- and optimizes dollars. “In the end, everyone wins,” Beran says. “The original user gets two or three years of use; the buyer gets another three or four years -- all while TCO and the carbon footprint drop.”

Rethinking Procurement, Lifecycles, Business Models

Stepping off the consumption treadmill and fully embracing the circular economy involves more than simply buying and selling refurbished gear. It’s vital to rethink procurement, product lifecycles and even fundamental business models, Russell says.

This includes adopting a plan for expanding the use of rentals, leasing and pay-per-use models, which reduce capital costs and deter waste for users while encouraging manufacturers to maintain equipment longer and better.

“The reality is that there’s no need to own every system and device. The goal is to get to the most efficient use of resources possible, and that can involve repairing, refurbishing, and remanufacturing things across the product lifecycle,” Russell explains.

Unfortunately, many CIOs and other IT executives have a skewed and inaccurate view about previously used technology, Stanish says. Organizations usually don’t require state-of-the-art servers and PCs for every use case and task. Buying second-hand equipment can dramatically cut costs without compromising computational performance. In fact, in some cases it can boost computing power at a lower price point.

The approach can also bypass months-long waits for IT equipment due to current chip shortages and global supply chain disruptions, Stanish points out.

Remarkably, some OEMs and third-party CE firms sell or lease previously used gear that’s in better than new condition, with warranties and support contracts that match and at times exceed what’s available for new computers and peripherals, Stanish says. It isn’t unusual, for example, to receive two to three years of support and service included with refurbished or remanufactured equipment. She adds that many of these devices, if they ever had a problem with a component, have already been fixed.

In the past, the idea of acquiring previously used equipment tilted toward small businesses, but Stanish says that she is now seeing an uptick in adoption at medium and larger enterprises. “A lot of the resistance is rooted in misconceptions and a lack of understanding about what previously used equipment and the circular economy can provide,” she explains. “There’s a belief that if it’s less expensive it must be lower quality. This simply isn’t true.”

CE Integration Planning

Diving into the circular economy doesn’t have to be an overwhelming task. For CIOs and others IT leaders, the process starts with a commitment to the concept along with a willingness to explore vendors and options -- and how to best integrate CE with enterprise technology plans, value chains, ESG initiatives, and recycling and waste streams.

Organizations fare best, Stanish says, when they establish a framework that addresses the entire lifecycle of IT equipment within the context of lowering carbon output, reducing costs and driving strategic gains. Analytics, metrics, and measurement tools are necessary to deliver deeper visibility into Scope 3 emissions that may extend into the supply chain, Beran says.

It's also critical to recognize that the CE marketplace is a bit different. Flexibility is crucial, Stanish notes. “These aren’t necessarily standard channels. In some cases, you are at the mercy of what’s available at any particular moment,” she points out. She believes it’s wise to work with major OEMs that typically have sophisticated CE models in place. This may include packaging, shipping labels and highly streamlined processes.

Yet, third-party CE vendors such as Circular Computing, Server Monkey and IT Renew are changing perceptions about the industry. For example, Circular remanufactures Dell, HP, and Lenovo systems with the promise of delivering 97% of the performance at 40% of the cost. It boasts a 3% return rate on its remanufactured laptops, which it describes as carbon neutral. Meanwhile, Server Monkey offers refurbished servers, storage and networking gear at prices that can reach 50% or more less than new.

Major companies in the CE space adhere to industry standards, including strict security protocols, to ensure that data is wiped, and equipment is free of malware. Organizations can increase the odds of buying high-quality gear by carefully vetting buyers and sellers and ensuring that the seller has a certification process in place along with a strong warranty, Stanish says.

To be sure, CE innovation is advancing rapidly, and equipment pipelines are becoming more robust and mainstream. Russell says that it’s crucial to keep a close eye on the circular economy. “The level of innovation that entrepreneurs and large companies are bringing through circular business models is exciting. CE holds remarkable potential. It’s a key pathway to sustainability.”

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