Mobile processing efficiency is key to sustaining secondary device market success

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Alan Bentley, President, Global Strategy at Blancco looks at the success of the secondary device market but warns against data security complacency.

The secondary smartphone market continues to grow, delivering new revenues and new opportunities to every one of its stakeholders. In fact, according to Counterpoint Research, the market for refurbished smartphones is now growing faster than for new smartphones. A staggering 140 million used devices have now been collected for redistribution. Last year, according to Persistence Market Research, the secondary device market was worth US$19 billion, and is set to more than double in size and reach a valuation of US$44 billion by 2026. That’s impressive scale for a process that started to keep used old devices out of landfill (which remains a critical focus for the secondary market today).

Big business, but time is money

From an operator perspective, the secondary device market is big business. Revenues extracted by unlocking the latent value of old devices is one of the few revenue streams available to them which continues to grow. This is a big deal given how hard new revenues are to come by, and the cannibalisation that has impacted many of their core service revenues from voice, data and messaging.

Operators and OEMs that manage device BuyBack processes, either directly or through partners, can, on average, extract between $100 and $300 per smartphone according to its model, age and condition at the point of upgrade. Realising optimal value depends on how efficiently an operator can process a used smartphone. It begins at the point of collection, goes through diagnosis, repair and refurbishment before being prepared for re-distribution. Put simply, with mobile device processing, time is money. The longer it takes to process a used smartphone, the more of its latent value it loses. Operators, OEMs and the third-party logistics providers that serve them both are all incentivised, therefore, to make marginal gains at every opportunity to protect optimal value.

Efficiency matters, but not as much as customer data integrity

Operators, OEMs and third-party logistics providers have fine tuned mobile processing. While the process from device collection to re-distribution is very involved, it is not unusual to be able to process several hundred devices each day. Typically, the process includes automated device testing, identifying key locks and determining device value. It then quickly and securely erases data stored on each device using properly scoped hardware and configuration, all in line with the necessary certification guidelines. Ideally, each device will then be given a certified tamper-proof audit trail, backed by a certification of data erasure.

With so much focus on operational efficiency, there will always be a temptation to dispense with some of these key steps. At present, the secondary device market is light on regulation. In North America, the leading global market for used smartphone collection, there are the R2 standards. These unite the leading carriers, OEMs and third-party logistics providers behind some common rules – but they are not a mandate, merely guidelines. In truth, pretty much every player in the secondary device ecosystem is R2 compliant – they have to be in order to do business with each other. However, R2 guidelines were not created with the collection and processing of used smartphones in mind, leaving many to consider their relevance and applicability to the larger, much more significant ecosystem that exists today. For example, R2 states that performing a ‘factory reset’ on a device is sufficient in ensuring all data is fully erased. In some cases this is true, in many others it isn’t.

Not a time for complacency

Without a common, mandated and regulated rule book for smartphone processing best-practice, the ecosystem will be subject to abuse and malicious attack. Let’s be clear, the secondary device market has functioned perfectly well up until now. R2 and other standards have done their job, consumer data has, in the main, been preserved. The current ecosystem is made up of multiple stakeholders, who collect devices from various touchpoints and redistribute them to many other parties. Since the speed of device processing is the only critical success factor, and as more and more devices flood the market, the chances of data breaches or issues related to data misuse will become more and more likely.

If operators or OEMs want a lesson in the damage caused by data breaches and the misuse of customer data, they need only look at Facebook. Operators have built a strong sense of trust with their customers – they have historically been reluctant to offer freemium services in return for customer data that can then be resold. This leaves them ideally placed to capitalise on this goodwill, create a raft of new offers and partnerships and target their customers with new digital services. This opportunity will only exist if they remain diligent to all threats and focused on the responsible management of customer data. The secondary device market remains an amazingly lucrative and exciting opportunity for everyone, but only if it retains full consumer confidence – confidence that is built on trust and data integrity.

Alan Bentley is President, Global Strategy at Blancco. He joined the company in October 2016 as VP of Sales, EMEA and more recently, has taken on the role of President of Global Strategy. In this role, he is responsible for overseeing sales efforts globally. As an industry veteran, Alan is responsible for leading the sales teams to develop sustainable and scalable revenue growth. Since joining the company, Alan has worked closely with Blancco’s many customers and partners to implement data erasure solutions to mitigate security risks and ensure regulatory compliance. This gives him a unique insight into the market and business requirements driving the needs of today’s businesses.