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Tue 16 Dec 2008 04:00 AM

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Look West

Facilities managers looking to implement best practice in the Middle East could do worse than study the IT asset management trends in the UK and US, brought into sharp focus by the economic downturn and lack of liquidity.

Facilities managers looking to implement best practice in the Middle East could do worse than study the IT asset management trends in the UK and US, brought into sharp focus by the economic downturn and lack of liquidity.

As the recession intensifies around the world and reports of market turmoil gain momentum in the UAE, the management of assets, maintenance, replacement and associated ROI will undoubtedly become more of an issue for facilities managers in the region.

And when you consider some £17m a year - according to KPMG - is being lost by UK companies alone that have neglected to implement best practice asset management (ITAM) strategies, facilities managers should be looking at their IT assets and how they manage and finance them effectively.

Knowing how many assets you have leased or licensed, where they reside, who is responsible for them, what the current financial obligations are for each asset and refresh schedules, are all key to a facilities manager’s ITAM strategy.

Lease finance

Compliance with regulations such as Basel II and Sarbanes-Oxley, and the requirements to furnish shareholders and regulators with accurate records of IT assets for financial control and information security, are key elements in securing funding for leased IT equipment.

"Before underwriting a lease we make an initial assessment of an organisation's asset management in trading, profitability and ability to identify and control trends in asset utilisation and/or values of a customer's business," says Matt Bowyer, head of asset management at Barclays Asset and Sales Finance.

"In circumstances where we assess this issue to be critical," Bowyer continues, "we would expect to see sound evidence of good asset management being practised, and an experienced team of customer auditors would be used to follow the audit trail." Evidence of all necessary monitoring and controls procedures would form part of the overall risk assessment of any lending proposition, says Bowyer.

"The risks associated with any potential economic downturn would be factored into the risk assessment. Systems would also be put in place to monitor compliance and ensure action if a significant downturn affecting trading or profitability should occur."


The Western downturn has, however, thrown up some positives in the financial sector. "For sure," says Kevin Cleary, general manager of worldwide global asset recovery services (GARS) at IBM Global Financing, "we're experiencing increased activity as the crunch bites and end users look to operational leases to free up cash flow for other parts of their operations, while enabling them to maintain and upgrade business critical IT equipment.

There is also a spike in new business, again to free up cash flow."

But, says Cleary, ITAM competency in organisations is a mixed bag. "It really is a lottery; there is no rule of thumb, whether that's a big bank or an SME. Some have multi-platform legacy systems with poor functionality, security and compliance. Some use bar coding to track assets. Other organisations have implemented secure single-platform next-generation transparency enablers whereby leases, loans and wholesale/inventory finance are all managed from a single visible platform, which operationally is what you want."


Jon Davies, country manager at 3 Step IT, agrees, adding that implementing an ITAM system requires investment and involvement throughout the organisation with an element of re-engineering and integration.

"The trick is to make the transition as smooth and painless as possible through flexible leasing and finance solutions. Ease of maintenance is also an important factor. In the past nobody wanted to laboriously maintain and update data on an unwieldy and often inaccurate off-system spread sheet. Next-generation platforms are secure and simple to use while software applications can be accessed online or on disk. And if needs be, the data can be accessed and tracked by facilities managers and the lender."

But there are issues surrounding software, primarily around standardisation. "This is the hot topic," says Steve Paterson at leasing software company International Decision Systems. "No one has yet written a cross border solution, primarily due to differing tax, VAT and lease agreement status."

Business critical

For any organisation, IT is business critical. The hardware, software and other advanced technology on, or connected to, desktops and data centres and so on, constitute a significant proportion of budget: an enterprise's IT estate can often account for 50 per cent, according to Forrester Research.

"In a distributed computing environment most enterprises' IT assets are decentralised," notes Cleary. "Knowing how many assets you have, which are owned, leased or licensed, where they reside, who is responsible for them, what the current financial obligations are for each asset and refresh schedules, are all key to a facilities manager's ITAM strategy." These parts have to work together, continues Cleary, to share information to provide a complete and transparent overarching picture of an organisation's IT assets.

"However, inconsistent input of standard asset descriptions and locations is a common problem with legacy systems. Next-generation technology systems use predefined, parameterised asset catalogues during the originations process, acting as a visual record of the asset description."

Accurate data, stresses Cleary, "is the foundation for your solution's capability to yield information that supports tactical decision making and optimisation of IT assets throughout the life cycle and, ultimately, achieve ROI".

IBM sets aside $100m per annum to develop and provide end users with software tools to asset manage in-house - free of charge. The software manages the entire lease cycle with information on everything from the serial number, make and model and install date, to payment plan and refresh date.

This may sound truly altruistic, but Cleary is candid: "The service is a key differentiator - a value add for us to compete on a global scale and leverage the sale of our leases," he says. The tool also heightens facilities managers' understanding of their IT strategy. They buy in when it comes to maintenance schedules, upgrades and new products. They are cycle-integrated rather than isolated, which can result in downtime."


The validity of the Kyoto Agreement will continue to be debated, but in some green circles the US's decision to opt out will forever remain unforgivable. So it falls to market forces to drive the US into a tree hugging frenzy.

Corporate social responsibility (CSR) has been on the European and US agenda for a lot longer than in the Middle East, points out Davies. "Take the UK's Waste Electrical and Electronic Equipment directive, for example, which restricts the amount of electronic waste going to landfill."

 Although, he concedes, there are some important aspects of the standard to be ratified, such as who is responsible for the collection and disposal of retired IT equipment.

"Presently, most operating contracts stipulate the FM is responsible for returning equipment at end of lease. We operate a value-added refurbishment process, which in essence means we find new homes for hardware before eventually recycling the parts in a secure and environmentally friendly manner," says Davis.

IBM has had an aversion to disposal for 20-odd years: just one per cent goes into landfill. "Looking at what we do at GARS - i.e. asset recovery - this is where we generate value in the lease - the back end. We know the used equipment market and the value of refurbishing, re-manufacturing and upgrading, which continues to realise value."

He adds: "We don't write down any of our assets. We operate a margin of 47 per cent and grossed $1.4bn through leasing and resale last year, that's ROI of 26 per cent."


However, adding value to a zero-value product, says Steve Taplin, associate director of sales and marketing at software solutions provider CHP Consulting, is not as prevalent in the Middle East market as overseas.

"Although margins are tight, some financiers simply rely on them and write down used IT equipment when the operational lease has run its short course. In the US and Europe, refurbishment and component cataloguing are used to greater effect to leverage further value from parts."

Davies agrees to an extent, but points to the number of partnerships in the finance industry being formed as a positive move forward. "We have recently partnered with HSBC IT Finance. The bank views IT investment as an unsecured transaction but realises the value of compliant asset management. By outsourcing, HSBC can target the market more effectively, derive value from retired equipment and refresh while satisfying its CSR programme."

Operating in a depressed economic climate means organisations, more than ever, have to be compliant and operate efficiently. That technology providers are rolling out transparent, next-generation platforms that also enhance performance is good news for facilities managers.

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