Build It or Buy It? A Case for and Against Outsourced Asset Management and Disposition

By October 12, 2009White Papers

The lessons learned over the years, along with the miles traveled, have taught us at Heritage Global Partners that no two companies are alike.  Each firm’s unique internal processes dictate their BPO agenda, strategy, and execution. We have seen very large multinational firms perform all asset functions from used equipment procurement to redeployment to disposition, and get excellent results from a completely in-house staff.  We have also witnessed huge improvements in execution and cost savings by others using a totally outsourced asset solution.  Hopefully this paper will address some of the relevant issues and factors that should ease the decision making.  There is no one size that fits all; often the best approach to asset management is a hybrid one, wedding outsourced vendors to an internally dedicated staff.  Each firm must do their own analysis of the internal resources and skills required and then bench mark against outside services to weigh the ROI.  There are three significant questions. Each with its own steps and procedures.

Question One: Do I have internal systems software services and staff in place today?

If the answer is no, then the first step in “Build it or Buy it” is to do an internal analysis of what’s missing.  Are we buying new tools for Plant A without visibility of Plant B?  Do we have warehouses of idle equipment from closed facilities?  Are we unsure of our asset values and potentially overburdened with taxes?  Is our book value too high?  Etc.  Each question will then dictate whether additional staff is warranted versus what outside resources exist.

Question Two: Will dedicated internal resources deliver maximum results at less cost?

This is always where the rubber meets the road and is often a tricky highway to navigate.  If you’re using internal remarketing and all your assets are selling to a handful of repeat buyers, you must question the process.  Ask yourself whether you are the market maker or are getting underpaid and allowing the reseller to make an aftermarket profit.  If so, at the very least select a good sample project, and outsource disposition to a sector expert.  Make certain your contract provides that they furnish the contacts of all interested parties.  In that case, you can chose to continue outsourcing, or at the very least leverage your new buyers to enhance future sales.

Question Three:  Does your situation require people or procedures?

In many cases, the systems are already in place, and the only thing lacking is sector expertise.  Oftentimes, we find a company with great enterprise visibility but no re-marketing expertise.  Generally this occurs when internal skill sets don’t line up with specific asset functions.  A good example is taking a procurement expert whose skill is in negotiating pricing on new tools and asking him to also sell idle equipment.  There is very little cross over between OEM purchases and remarketing in the secondary channel.  Like many situations, this warrants an inexpensive hybrid approach where you keep your systems, and outsource market making.  Clearly the opposite may occur where you need outsourced systems to identify and describe assets, but know your market and competition so well you won’t need sales support.

To decide whether to build or buy asset services, you must look inside and outside the same box.

Ross Dove

Managing Partner

Heritage Global Partners

Asset Advisory and Auction Services

A Legacy since 1937