November 30, 2010

What IT Resellers Mean to the Economy

Recently I read another article in the Denver Business Journal relating to IT resales and their effect on the current economy. IT Resale Company’s buy used computers, servers, and other business technology, and then prepare them for resale. According to the article many economic professionals see this as an indicator that the economy has a long way to go before it can reach a full recovery. During the hardest part of the recession business’s had to downsize but decided to try keeping their IT equipment because they would need it all when they were able to hire everyone back. Eventually, these companies started to sell their equipment to IT liquidators after three or so years of layoffs and other business failures due to a failing economy. As evidence to this statement the article stated that one company, IT Liquidators, purchased just over 6,200 pieces of IT equipment in 2007 and over 29,900 pieces in 2010. These numbers suggest that companies did not hire back workers and eventually more and more company’s started selling their old IT equipment that they weren’t using. The article also stated that IT equipment drops 3-5% in value per a month so waiting so long was very costly for the selling company’s. The rest of this article will examine how even though IT resellers are greatly increasing their business, it’s not helping to improve the economy.

At the beginning of the semester we learned how demand was the quantity of goods or services that a consumer is willing to purchase at each price. Demand can be viewed from both sides in this situation. First, there is a high demand for old IT equipment from failing businesses by IT resellers because it is a highly successful business right now. In fact the article stated that during the recession IT Liquidators business has quadrupled. Also, there is the higher demand for used IT equipment for businesses that have began to grow again. The article stated that survival for most companies these days starts with being more cost-conscious. This has led to businesses being more receptive to buying used IT equipment. Another fact is that businesses aren’t willing to go out and buy the more expensive upgraded gear unless there will be an immediate return on their investment.

IT equipment resellers are not the only companies in the field who have seen an increase in demand for their commodities. Being more cost-conscious has also led some companies to repair what IT equipment they have currently rather than buy new or used equipment. The article mentioned that Action Computer’s repair business has increased 40% in the past year alone. As I mentioned earlier even though business has drastically improved for IT equipment resellers and IT equipment repairing companies, it’s a bad sign for the overall improvement of the economy. This suggests that the reason so many companies are selling their IT equipment is because they’re downsizing or going out of business which is the exact opposite of what is necessary for the economy to start growing again.

Sources:

Denver Business Journal November 26- December 2, 2010 “IT resale’s good, but that’s bad for economy”

1 comment:

gseaber said...

Dennis:
Enjoyed your economic analysis of the article written about my company in the DBJ. I could relate to your blog post as I have an economics degree from UCLA!

Many may believe the only carrier for an econ major is to become an economist. Not true! I use my econ degree every day as a small business owner in the IT remarketing industry.

Furthermore, my daughter attends UCCS. Would love to speak to your econ class about real world economics. If you think that would be of valuable to your class and to your instructor, let me know. You can reach me at WeBuyIT@ITliquidators.com. Would give me an excuse to visit my daughter!

Sincerely,

Garry Seaber
CEO/Founder
ITliquidators.com