By DJ Kumbula CA (SA), co-founder and CEO of InnoVent Rental and Asset Management Solutions.
I have been in the IT leasing and asset management game for about 20 years. We started off in South Africa but have since expanded to 4 other countries including the United Kingdom.
Over the years, I have engaged with many C-level executives of large organisations in both private and public sectors.
The one matter that has really struck me over all these years is how much organisations spend on IT hardware such as laptops, desktops, servers as well as other IT hardware and yet there is no proper control of and accounting for these expensive assets.
Prior to purchasing, organisations follow rigorous procurement processes that ensure they secure the best products at the best prices.
Significant budget is allocated to IT every year for IT hardware procurement, but it feels like it goes into a “black hole” because there is no accounting and transparency post the purchase of the hardware.
There are three main asset management problems that large organisations usually struggle with:
1. Lack of reconciliation between asset register and reality
The first problem across most organisations is that there is no reconciliation between the IT asset register (if it exists) and what is actually happening in the field.
The IT asset register is simply non-existent and if there, is for “display” purposes as it has no semblance to the actual assets in the field.
In some instances, the asset register has assets that were recorded more than 10 years ago at purchase.
Most shocking is that these organisations are aware of this reality and yet do nothing – it is acceptable to have no control or even unaccounted for losses on IT hardware that the organisations purchase for millions of Rands.
I really don’t understand why management and auditors accept this state of affairs as the norm. It’s a total disregard for King III.
When I have probed, I have received different responses. Here are a few:
“No-one knows who should manage and account for IT assets – the matter has never been resolved between Finance and IT.”
“We expense all assets below a certain cost threshold therefore no need to track and manage these.”
“We have bought so many tools to track and manage our assets, we just never implemented them.”
“We have insurance, so we don’t have to be concerned with asset management.”
“We just don’t have the discipline.”
I leave you the reader to decide if these responses are satisfactory and if the status quo should be maintained.
2. No lifecycle management discipline
The second problem is that there is simply no lifecycle management discipline.
The asset is only recognised on acquisition – but who uses it, for how long, when it is disposed, how it is disposed – no-one knows.
I have engaged many large organisations who employ say 5,000 staff who use desktops and laptops, but who in fact have in excess of 10,000 devices! Imagine the financial consequences of this from double acquisition costs, high maintenance costs to theft or unaccounted for losses.
Uncontrolled disposal opens a whole new can of worms on data confidentiality. Are management aware of this? Yes they are, but nothing is done about it. IT asset management is treated with apathy.
3. Cost-effective alternatives are ignored
The third problem that arises from this is that cost-effective alternatives such as leasing for the acquisition and procurement of IT hardware are now cast aside as they are deemed “not to work in our environment”.
This particular rebuff is used by many executives of large companies very proudly – “there is no problem with your rental solution, the problem is us, we just don’t have control of our assets”.
Some who have rented their hardware in the past would even blame the rental solution for their woes! Really? So, in which world are you allowed to turn down cost effective solutions because you proudly admit you are not in control of your assets?
Value is being lost because you simply choose not to solve the asset management problem.
Rental companies are not to blame
Let me just deal with the elephant in the room. Rental or leasing is not to blame for your asset management problems, quite the opposite.
Leasing exposes and highlights the weaknesses in your asset management systems, which are hidden or covered up when a capex model is used as no-one asks for accountability once the asset is acquired – the black hole.
The correct response when leasing exposes these weaknesses in IT asset management is not to blame leasing for it – the correct response is to address the root cause, which is accounting for and managing all assets the organisation acquires.
In conclusion, IT asset management must be confronted.
Firstly, it’s not OK to simply ignore this problem both from a governance and fiduciary point of view. Organisations must account for their assets.
Secondly, by ignoring asset management, more cost-effective alternatives such as leasing cannot be implemented therefore compounding the problem and costing the organisation even more.
Thirdly, if you don’t know what you have, how do you create an informed IT hardware strategy – you are basically reactive rather than being intentional and pro-active. Could you be flying blindfolded? That is not good business – for stakeholders and shareholders.
This is an opinion piece.
This article was published in partnership with InnoVent.