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If your organization has considered acquiring a refurbished PC, but is tempted by the falling prices of newer IT equipment, you may wonder just why you might consider buying refurbished over a shiny new model. You’re not alone: others have also questioned — sometimes loudly — how long the used computer market can last given the diminishing prices of new equipment.
Yet to paraphrase Mark Twain, reports of the refurbished computer’s demise have been greatly exaggerated. Nor are they anything new: Oakland Technology Exchange West’s Bruce Buckelew, who has been refurbishing computers and supplying them to low-income students for a decade, recalls doomsday forecasts about the computer refurbishment field way back when he first started.
Below, I’ll describe some current research on the used, or "secondary," marketplace as well as some of the trends that address the viability of the refurbished computer market.
The Cause of Refurbished
We, at TechSoup, have for a long time been fervent advocates for refurbished PCs. They're low-cost, they work well for most purposes, and there's a brilliant environmental case for electronics reuse. Three to five-year-old computers are fast, powerful, and adaptable enough to meet the needs of organizations and individuals who need them. It is roughly 25 times more environmentally beneficial extend the life of used, three-to-five year-old computers than it is to end-of-life recycle them at that age; in his book Natural Capitalism , Paul Hawken writes when you discard a five-pound laptop you are also throwing away the 20,000 pounds of raw materials it took to make it.
Obviously, not every computer can be salvaged, and your organization shouldn’t accept just any used computer for the sake of environmental responsibility. Yet for many purposes, refurbished equipment presents nonprofits, libraries, and low-income families with a lower-cost alternative to new equipment, one that will do nearly everything that new computers do.
Growing Supply, Increasing Demand
All of that is fine, yet the question remains: How robust is the used computer market and is it trending down or up? Current research indicates that there is increasing demand worldwide for used computers. IT and telecom research firm Gartner Dataquest found that the secondary PC market is growing rapidly: 55 million PCs worldwide in 2004; and 86 million 2007. Gartner also found that of the nearly 200 million PCs that were retired by corporations and institutions in 2007, fewer than half found their way into the secondary PC market. Moreover, the research firm also found that demand remains larger than supply.
- Supply. In 2005, Gartner Group’s initial study of the secondary PC market entitled "Thriving Secondary PC Market Puts Old PCs to Good Use," found that more than 75 percent of PCs replaced out of the corporate install base in the United States are four years old or less, yet only 36 percent continue to be used. There is growth room on the supply side of the secondary PC market.
- Demand. In Gartner’s sister study "Thirst for Technology Drives Used PC Emerging Markets," they predicted an increased demand for secondary PCs in both the home and professional markets. Their 2008 update on these initial reports,"User Survey Analysis: Secondary PC Market Offers Growing Opportunity," continues to support both the supply and demand growth projections, finding that " only one in five PCs suitable for reuse finds its way from a mature to a developing country market, even as demand for secondary PCs outstrips the available supply. The demand for used PCs will remain substantial, even though regional demand patterns will probably shift again as emerging markets mature and new emerging markets join the demand queue for secondary PCs." The latest Gartner study finds that export tariffs and high transportation costs tend to restrict secondary PC markets.
Other data supports Gartner’s findings. In a 2009 study examining the flow of used IT equipment from the United States to Peru, Dr. Ramzy Kahhat and Dr. Eric Williams both of Arizona State University found that at least 85 percent of second-hand computers imported to Peru are reused, indicating a strong trend of used-computer adoption in developing markets worldwide, especially in major cities. "Demand for operative used computers in emerging countries is considerable and growing," Kahhat and Williams write, "allowing the possibility of a second use of the device and the trade of used computers from developed to developing countries. This practice is also performed within developed countries, where donated computers are reused in schools, libraries, and nonprofit learning organizations." The authors go on to note that, as in the United States, a functioning used Pentium 4 computer is about half the cost of a comparable new computer.
One of the best measures of market growth in PC refurbishment to low-income Americans and people in the rest of the world is the growth in software sales in the Community Microsoft Authorized Refurbishers (MAR) Program. The Community MAR program provides very low-cost Windows XP licensing to just under 700 PC refurbishers in North America and to over 1,200 refurbishers in 70 countries, who supply computers to low-income individuals, schools, and charities. Ordering in the program has been steadily increasing from the program’s inception in 2000. From 2007 to 2008, the Community MAR program had a 57 percent volume increase worldwide; in the recession year of 2009, order volume has to-date increased 16 percent from 2008. Order volumes have increased in North America as well with a 33 percent increase from 2007 to 2008, and a 31 percent increase in 2009 over the previous year. These trends indicate steadily increasing demand for refurbished PCs among charities, schools, and low-income families.
More Power, Lower Prices
Yet as the price of new computers continues to fall, will they at some point be just as or more affordable than used equipment? While it is true that the price of new computers has decreased over the years, refurbished equipment remains a more affordable option. TechSoup’s Refurbished Computer Initiative (RCI), for example, has been tracking the price of refurbished computers since 2005. During this time, we have found that the price of three-year-old Dell Optiplex computers has fluctuated between one-half to one-third of that of new Dell Optiplex computers. Currently, our RCI Dell Optiplex machines are about half the price of the new models, and perform the essential functions that nonprofits and libraries need of their computers: web browsing, email, office applications, social networking, and accounting. Moreover, refurbishers are increasingly offering warranties and comparable fail rates with new equipment.
Refurbished models are oftentimes not only more affordable than newer models, but more powerful — especially when compared to new low-cost laptops called netbooks. These new computers are vigorously driving price pressures downward, and accounted for 12 percent of PC sales in 2008, according to market research by the NPD Group. In a piece titled "Will Low-Cost PCs Kill the Refurbished PC Market?," Microsoft’s Manager of Emerging Solutions and Refurbishment, Sean Nicholson, writes that in many markets, not only are refurbished PCs still less expensive than new netbooks, they also provide more power, screen space, storage space, and are easier to repair. In places like South Africa, he writes, "you can buy an A-brand refurbished desktop with a faster processor, bigger screen, and larger hard drive than a new netbook, for under $100."
Nicholson estimates that, as the sale and use of laptops and netbooks (which, he writes, account for over 50 percent of PC sales in wealthier countries), the used laptop market worldwide will probably echo the trend of the used desktop market, offering a price point below the cost of new laptops and netbooks. "Refurbishers in emerging markets will start to see a higher supply of laptops for refurbishment. Because they are much cheaper to transport, laptop prices will come down, and they will start appearing in the larger markets in emerging economy countries," Nicholson says.
The Future of Refurbishment
If netbooks are having an impact on the second-hand computer market, then what about the even larger market in smartphones like the iPhone, which combine the features of mobile phones with those of computers? There is conjecture that mobile phones will replace PCs over time.
Mobile phone adoption is on the rise around the world, especially in Africa, where, according to the United Nations International Telecommunications Union (ITU), over a quarter of Africa’s roughly 1 billion people have mobile phones and adoption is growing at a steady 65 percent per year, People are using smartphones to connect to the Internet, send email, and social network. Yet will they replace computers in the foreseeable future, and how might this affect the refurbished computer market?
In a U.S. News and World Report article How the Phone is Replacing the Computer, reporter David LaGesse writes, "Nobody suggests that the PC is going away. Running a complicated spreadsheet or editing a video still requires a big screen and powerful processors. But evidence is growing that phones are poised to displace PCs for most of our computing." People like Netscape founder, Marc Andreessen and Sprint CEO, Dan Hesse both disagree. Hesse in particular predicts that with new fourth generation networks that combine data and voice, that the trend toward multiple function smart phones will revert people back to using multiple IT devices like netbooks, tablet computers, digital book devices, and simpler mobile phones. He is pretty much betting his company on this trend. I tend to agree. No power-smartphone-user that I know has dispensed with their laptop.
Someday, I guess, used PCs and other IT equipment will be a rarity. Raymond Kurzweil envisions a time when three-dimensional molecular microprocessors will be commonly implanted in to our brains for the purpose of intelligence and physical amplification. I suspect that even then, there may well be a decent market for low-cost used computer implants.