March/April 2009
By emphasizing reuse and refurbishment over recycling, TechTurn gives computer systems a second life and gives many companies and individuals an economical alternative to buying new.
By Diana Mota Morgan
Adhering to the three R's isn't just for school kids learning reading, 'riting, and 'rithmetic or environmentalists touting reduce, reuse, and recycle. Just ask Jeff Zeigler, founder and CEO of TechTurn. For this electronics processor, it means recover, refurbish, and remarket. The company, headquartered in Austin, Texas, gives used technology a second life by acquiring it, fixing it, and reselling it. Suppliers get paid for their old equipment as well as the assurance of environmentally sound processing and secure data destruction. Consumers of TechTurn's secondhand inventory, who aren't necessarily looking for the latest systems, have an avenue for saving money on technology.
TechTurn operates two facilities—the Austin facility, which occupies a 120,000-square-foot space and employs about 100 people, and an Ashland, Va., location, which occupies an 80,000-square-foot building and employs about 70 people since it opened nearly three years ago. They have a combined processing capacity of about 15,000 units daily.
Zeigler founded TechTurn as Newmarket IT and ComputerResale.com in 1999 after working in the computer services industry for eight years, focusing on returns management and asset recovery programs for reusing technology. Ten years ago, the options for retiring computer systems and other electronic equipment were limited, he says, to dumping them in landfills or delegating them to the backs of storage closets to gather dust. Chief Operating Officer Vito Fabiano agrees. "As a former [chief information officer] back in the 1990s, I couldn't tell you what happened to my IT assets," he says—they just disappeared and new ones showed up. The business grew out of a need for an alternative to landfilling or storing, Zeigler says.The widespread replacement of technology due to Y2K compliance concerns helped fuel that need, Zeigler and Fabiano say. There was "an explosion of new assets going in," Fabiano says. Zeigler was willing to pay to take the old ones and give them a new life. He started the business in his garage in Austin before moving it to a one-bay warehouse two months later. Since then, the company has moved three more times in Austin before settling in its current location in summer 2006.
TechTurn is built on the belief that retired computers can have a second, useful life as whole computer systems or as parts. Reuse is better for the environment than recycling, Fabiano says. Shredding an asset is 50 percent better for the environment than landfilling it, but reuse is 85 percent better or 100 percent better if it prevents a new system from being built, he says, and 60 percent of what TechTurn sells does exactly that. It all relates to the computer's carbon footprint, he explains. "Twenty percent of the carbon footprint is tied to lifetime electrical consumption; 80 percent of the carbon footprint is mining the components, logistics, manufacturing, [and] distribution of the asset."
TechTurn transports the used equipment; evaluates it in terms of usability; destroys data; refurbishes, repairs, or tears down units; resells the refurbished goods or components; sends unusable components to recyclers; and generates reports of the entire process. It's about IT sustainability, Zeigler says—reusing technology and finding additional value from that technology for TechTurn and its customers.
Where It Comes From
TechTurn's suppliers are mostly U.S. companies refreshing or replacing equipment that's typically three to five years old, says Bill Long, vice president of strategic partners. "It tends to be retired from a commercial environment. We don't have drop-off locations for consumer returns," he says, because recycling individual consumer goods is not cost efficient on a small scale. Because of disclosure agreements, TechTurn cannot name its clients, but Long says they're some of the largest U.S. companies, including computer manufacturers, equipment-leasing companies, Fortune 500 companies, and education institutions. "We had been fairly well concentrated in working for the computer manufacturers," he says, but over the past two years the company has expanded its client base.
Suppliers are looking for a customized solution for retiring their assets that ensures environmental compliance and secure data destruction while profiting from their old equipment, Fabiano says. Laptops, desktops, monitors, and servers constitute about 90 percent of the products TechTurn receives, Long says, adding that the company also accepts printers, copiers, fax machines, and peripheral data center equipment including large storage arrays or even mainframe computer systems.
TechTurn purchased outright about 10 percent of the systems it received last year, Long says. For the most part, however, the company commits every month to paying its clients a certain amount for the systems they provide so long as the equipment has the features and usability the supplier said it was providing. The majority of the company's annual revenue comes from the resale of functioning systems; the remainder comes from the sale of components and from service fees.
The Processing System
The first step, Long says, is de-installing the equipment, which either the customer does or TechTurn does. TechTurn documents every step from recovery to resale, Long says. "It's no longer sufficient to have adequate, robust recycling procedures; you need to document it, and you need to be able to provide proof after the fact that you've done with the equipment what you said you've done with it."
The company keeps other information, too. "We track metrics and statistics about what products come in and then what percentage we're able to rebuild and resell vs. those that we have to destroy or recycle," Long says. "In general, we facilitate the reuse of more than 80 percent of the products that come through."
The 20 percent that are not reused are manually disassembled into component parts. About one-fifth of those components the company can reuse in rebuilt computer systems or sell; the remainder—about 16 percent by weight of the equipment it receives—it recycles. "We tend not to throw [everything] all into a big pile for shredding," Long says. TechTurn's goal is to reuse as much of the system as possible.
Three to seven truckloads of goods arrive a day, plus a few smaller packages, Long says. Upon its arrival, workers weigh, photograph, and check in the equipment. "Basically it's receiving," Long says. They remove customer asset labels from the equipment, and each asset receives a new tag with the lot number of the pallet. This allows TechTurn to provide a detailed inventory of each asset from the lot for the customer.
Workers "de-trash" the shipments, separating computer systems from everything else. "Some [things] we keep for reuse later, like power cords and keyboards," Long says. "Some of the items are just rubbish or trash that we'll dispose of" or recycle, such as packaging material. Other items get separated into 20 to 30 categories for recycling or reselling.
Questionable monitors go to recycling partners TechTurn works with for further testing. If the tube still works and the screen is not burned or etched, the partner takes the monitor apart and ships the tube overseas for use in a new monitor or television, he says. The company will not accept shipments of broken CRTs because of the hazards they pose, he adds.
Winding Through the Process
After check-in, the shipment moves along roller conveyors to auditing or asset discovery. Pallets containing boxes of monitors and desktop and laptop computers wait in the staging area for workers to separate the items according to type—monitors go on one conveyor belt, desktops on another, and laptops on still another.
The auditors log basic information about the asset into the database using the equipment's bar code, which identifies the manufacturer, serial number, processor speed, hard drive capacity, model number, and amount of memory. An auditor can enter 500 to 800 assets a day into the database by using a scanner, Long says, adding that it cuts down on errors. The information becomes part of the customer's report, and subsequent steps will add to the database the item's test results, repairs made, and sales price. TechTurn has developed the database over time, he says, but "we're moving to a customized industry-standard tool. It's a robust database that's used to capture the data."
Audited items move to the middle warehouse. Notebooks and desktops head left for testing and erasure of their hard drives. Data destruction is a big part of what TechTurn offers. Data are most vulnerable in retirement, Fabiano says, not when they are being transmitted or stored on active computers. TechTurn offers three levels of data erasure: data clearing, a one-pass overwrite of the hard drive; data sanitization, a three-pass overwrite—the Department of Defense standard; or degaussing, which destroys the hard drive. "Under certain circumstances [data clearing] is good enough, but if you really want to make sure the data can't be retrieved, a three-pass overwrite is recommended. If it's proprietary or confidential information, sometimes the hard drive just needs to be destroyed," Long says. Some clients request that TechTurn wipe the drives on the clients' premises. TechTurn also does data erasure for equipment leasing companies between lessors.
Technicians then inspect the drives with forensic tools to ensure that the data are removed. TechTurn worked with several companies to develop the software that tests and wipes the systems as they come through, says Neil Simmons, operations director. "We automated the whole process. We took the technician out of the individual steps, and we made it so it's almost a plug-and-play operation. Everything gets written back to our database." A test technician uses a mobile cart to go up and down the lanes to finish the testing, record the results, and send the unit to its next destination based on its test results.
"Testing is a combination of data sanitization and testing the functionality of the systems that come through," Long says. "Depending on the size of the drive, it can take three, six, or eight hours." If a drive fails, the system is torn apart, and technicians will attempt to wipe the drive clean after they remove it from the computer. "About half of the drives that are given a second chance do pass," Simmons says—if not, they're destroyed. Systems deemed nonfunctional make their way to the repair and teardown area. Most of the repair is done on notebooks, Long says. "On average, it takes three weeks to ready a notebook for resale. We basically disassemble the systems."
With the knowledge that comes from its repair work, TechTurn provides the manufacturers' system engineers and designers with feedback that helps them identify recurring issues with their equipment. "We sat in on meetings with them on how to extend the useful life of the systemor increase the recyclability of the system," Simmons says. "We can tell them that on a certain family of notebooks exactly at which points the factory must have been screwing the screws in too hard on a plastic component that breaks [once] on every 10 notebooks."
TechTurn reuses what components it can or sells them. Reusing and getting as much value from each asset as possible is the goal, Long says. "We're our best customer when it comes to spare parts." The parts would cost significantly more if TechTurn purchased them new, he adds.
The company ships failed monitors, batteries, and circuitboards downstream for recycling. "We concluded that it's not in our best interests" to recycle them in-house, Long says, citing the hazards, liabilities, and capital intensity involved. Fabiano agrees. "We will not win on a straight recycle—that's not who we are." Very little goes into the trash. "We're pretty proud of the fact that we received an inactivity fee last year from Waste Management for not using the Dumpster often enough," Long says. The company bales and recycles the corrugated cardboard and shrink wrap from shipping.
Systems that get a green light ride the conveyor belt to the final warehouse for quality control, touch-up, and packaging. "The operating system for a computer is a significant issue in our rebuilding process," Long says, because it's only valid for the original owner. In November 2007, TechTurn became one of the first Microsoft authorized refurbishers. For a fee, the company now can reload Windows XP software onto systems that have a certificate of authenticity.
TechTurn packages computer systems individually, in sets of five for retail shops, or in sets of 48 for larger customers. The company also offers employee purchase programs to companies. Some units it will sell individually through its Web site. "We test and we grade our monitors and other systems and sell them to customers with a warranty and money-back guarantee," Long says.
A notebook usually sells in about a week to several weeks, depending on the specifics, while a desktop takes a little bit longer. The longest a system has sat on the shelf is a year, Long says. Typically, he adds, that doesn't happen. "If something's here for more than six months, we'll usually take it apart and recycle the components." The company documents the entire process from to start to finish and reports back to the supplier. The company's processes are ISO 9001:2000, ISO 14001:2004, and OHSAS 18001:1999 certified.
Company Growth and Development
Zeigler doesn't have to travel far to remember where he started. The company he founded nearly 10 years ago sits across the parking lot from the one-bay warehouse it occupied after moving out of his garage. The latest move, in summer 2006, took it from a 50,000-square-foot space into its current space.
Although it's easy to see where he came from, Zeigler would rather keep his eye on where he's going. To grow the company, TechTurn built up its leadership team, which includes Zeigler; President Jake Player, who joined in summer 2006 after serving as the leader of worldwide asset recovery services for Dell; Trent Turner, the chief financial officer, who also joined in summer 2006 after working in Dell's finance organization; Fabiano, who developed Dell's management services; Long, who joined six and a half years ago—his first three years out of New England in sales and business development before relocating to Austin; and Simmons, who worked his way up from the shop floor. "We're a single team here," Fabiano says. "We all have areas of expertise, but we really collaborate in terms of a leadership team. Most companies of this size never get big because they don't invest in talent; they don't invest in a management process; they don't invest in physical process metrics." A few sales executives still work remotely from Columbus, Ohio; Raleigh, N.C.; Chicago; and New York.
Part of the company's growth is due to an infusion of capital: In 2006, Catterton Partners (Greenwich, Conn.), a private equity firm, approached TechTurn and invested $50 million into the company. "We're making investments" in developing the company's infrastructure, Fabiano says. "We have a CEO, a COO, and we have a president." Bringing TechTurn to the next level is what attracted him to TechTurn, Fabiano says. "Here I saw all the pieces … [Jeff Zeigler] had built all the infrastructure, had all the capabilities, what he needed was a way of communicating to the market and getting access to the right clients. We've been able to do that."
The company expects to continue growing its processing and sales capacities. TechTurn opened the Ashland facility because of its proximity to ports in Norfolk and Newport News, Va.—the company exports a significant portion of its finished units overseas, primarily to wholesale distributors, Long says. Eventually the company would like to expand with Midwest and West Coast locations.
Looking Ahead
TechTurn still has some work to do, Fabiano says. "Still [when] you say TechTurn, people say 'Who?'" Part of the problem, he says, is the client privacy rules, which prohibit the company from using clients as references. Delayed replacement of equipment—especially in today's economic environment—is the biggest challenge, he says. "We rely on new technology going in to replace the old." The cost of new equipment also presents a challenge, Long says. "As a rule of thumb, a newly used piece of equipment is worth no more than half of a new piece of equipment." As computer companies lower prices or increase performance of a new system, that drives down the value of the used systems.
As far as where TechTurn fits into the electronics refurbishment industry, "We think there are three or four independent competitors with national reach, including TechTurn, and many more small regional operators," Long says. Several large manufacturers also maintain recovery operations for their own products. "An International Data Corp. survey states that out of 113 players in this industry, there are only about 10 that are bigger than $50 million," Fabiano says. "We're right at the cusp; we're right in that top tier. It's a very fragmented industry. There is no lead dog in the industry." TechTurn's goal is to become the industry leader.
To help reach that goal, TechTurn created a new phrase for what it provides: IT sustainable services. "You're basically balancing three forces: value for the equipment, environmental compliance, and data sanitization," Fabiano says. "We have a sustainable model advantage. We're able to renew a much higher percentage of technology than anybody else. We're able to take 10 computers that don't work and make eight of them work, as opposed to taking 10 computers and turning them into a bunch of parts or take 10 computers and turning them into a bunch of powders." The end result, he says, is more value for their clients.
TechTurn takes a customized approach, he adds. "It's not about arguing in the middle and saying, ‘OK, I can top that; they do it for X; we can do it for X minus something.' We're going to give you choice. You will decide what the best solution set is, and whatever you select, we will go execute it without excuses." It's that philosophy he believes will push TechTurn to the top. "You have to have thought leadership, bring innovation, attract the right talent, and ultimately deliver what customers value. In this industry, it is doing the right thing. It is about data security. It is about environmental compliance." •
Diana Mota Morgan is associate editor of Scrap.
By emphasizing reuse and refurbishment over recycling, TechTurn gives computer systems a second life and gives many companies and individuals an economical alternative to buying new.