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What is Asset Management?

This is a chapter from a book entitled “Software Asset Management (SAM) ~ the first ninety days“. I plan to publish each chapter online before publishing the whole book as a low cost ebook or paperback. I welcome your feedback and criticism along the way. Please either leave a comment on the individual chapters or get in touch. A summary of all chapters can be found here.

What is Asset Management?

“Price is what you pay. Value is what you get” ~ Warren Buffett

“Price is what you pay. Value is what you get” ~ Warren Buffett  [Buffet and President Obama at the Oval Office, July 14, 2010.]

“Price is what you pay. Value is what you get” ~ Warren Buffett [Buffet and President Obama at the Oval Office, July 14, 2010.]

Money Management

For most people the term “Asset Management” refers to managing money.

If you are fortunate to own a big pile of cash you might ask an Asset Management company to manage it for you. The company will invest your pile in a portfolio of financial products to manage on your behalf. Which products they invest in will depend on your outlook on life and attitude to risk.

A person in the autumn of their career close to retirement might opt for safe and steady government bonds with a low but predictable return whereas a more adventurous investor might opt to invest in start up businesses with higher risk but with the potential for more lucrative yield.

The underlying principle: Your assets are put to good use whilst respecting your attitude to risk.

Aircraft Carriers, Forklift Trucks and Chainsaws

Beyond the world of finance Asset Management principles can be applied to all things a business owns from sturdy tangible things like aircraft carriers, forklift trucks and chainsaws to conceptual intangible things like ownership of intellectual property, brand names or goodwill.

As with managing money these assets generate a return for the business. The return might be quantified in terms of productivity, performance, profitability or the best possible service to customers.

As with investing in different financial products, business assets also carry varying degrees of risk. These risks can be classified as:

  • Financial risk: the asset may generate costs
  • Contractual risk: the asset might only be used within certain contractual terms
  • Legal or Compliance risk: the asset might be constrained by certain laws or industry regulation

Asset Lifecycles

Asset Management principles are applied to the whole life of the asset from the time it begins to have an impact on the business to the time it is removed.

  • CRADLE: The life of an asset might begin when a business includes it as part of a strategic plan, creates an idea or it makes an intent to purchase the asset i.e. by raising a purchase order.
  • GRAVE: The life of an asset might end when the asset is destroyed, expires or the ownership is passed legally to another organization.

In simple terms the lifecycle of an asset can be broken into four general elements:

  1. We create or acquire assets
  2. We utilize them
  3. We maintain them
  4. We renew or we dispose of them

It is important to consider the whole lifecycle when managing assets since each element above has an impact on the overall risk and value of that asset.

Logchop4u Inc.

Logchop4u is a tree surgery and forest maintenance company. Chainsaws are a key strategic asset for the company; they are critical to the profitable delivery of contracts and also carry significant risk, from the mundane to the life altering.

The company must strike a balance between maximum output of the chainsaws and minimising risk. Logchop4u also faces certain legal constraints when using its chainsaws such as use of safety boots, gloves and masks by certified licensed operatives.


Logchop4u employs a chainsaw maintenance firm to service the engines and maintain cutting chains. Sharp chains on chainsaws free from sawdust perform better. The company also maintains central records of all key equipment and staff.

The company has learnt proactive maintenance of their chainsaws allows them to meet their legal requirements but also improve the profitability of contracts. Well-serviced chainsaws operated by highly trained operatives equates to less down time to broken equipment, the prolonged life of equipment across several contracts and lower insurance premiums.

When a chainsaw comes to the end of its useful life with the business, Logchop4u sells the equipment on to another firm and receives a certificate to prove that it no longer an asset within the business, relinquishing the company of its legal responsibilities relating to that asset.

Logchop4u are able to minimize risks whilst maximizing returns from their assets – equating to better service to customers and more profitable contracts. It is not obvious that these are Asset Management principles at work. As with any best practice you might also call this ‘Common sense’ or simply ‘Good business practice’.

Emotionally Cold

It is worth noting that it requires a certain level of emotional detachment to manage something purely as an asset.

Two of the most expensive items an individual is likely to purchase are a house and a car. Yet very few people ‘sweat’ these expensive purchases as much as they could. Very few people rent their car out when not in use or sub-let their house for alternative use during the day. These items are, traditionally at least, seen as personal items with emotional value.

At first glance you might think this principle only applies to personal purchases rather than the professional arena of business – but many strategic business decisions around assets are inextricably linked with company politics, history and emotional attachment.

As I write this, Ford Motor Company has just announced their decision to cease production in Australia. If the Ford Australia territory is viewed as an asset in the broader Ford portfolio then it is a no-brainer to close it (lost money for the last five years, cheaper to import into Australia than manufacture locally). However this was wretched decision for Ford to make after 85 years of manufacturing in the country and the loss of 1,200 jobs.

Unless you are a quartermaster in a Buddhist temple, all assets have some degree of emotional attachment.

Emotional attachment is apparent within largest decisions about leaving a territory to the very small decisions about which loaf of bread to buy. Those of us working in the Asset Management field need to be sensitive to these connections.

Priorities and Convenience

Asset Management can be defined as:

“Any system that monitors and maintains things of value to an entity or group” ~ Wikipedia

The Asset Management ‘system’ requires horsepower to run in terms of human input, processes, and checks and balances. Therefore every business has to prioritize which assets they manage in order to make best use of their time and resources.

The law of diminishing returns applies here, in that there will be threshold in which the value of the asset is outweighed by the cost of managing it.

Cynics might argue that business behaviour is governed by money and legislation. The same can be argued of Asset Management – convenience and financial return are at play. Assets get managed when legislation dictates, it is convenient or financial rewards make it obvious to do so.


Asset Management is a system for monitoring and managing things of value. Through the practice of Asset Management we can maximise the value of assets, minimize risks and underpin improved delivery of services.

Key benefits of Asset Management

  • Increased productivity, performance and profitability
  • Best possible service to customers

Key risks associated with Assets:

  • Financial
  • Contractual
  • Legal or Compliance Risk

Asset Characteristics

  • All assets follow a lifecycle of ownership
  • All assets have some degree of emotional attachment
  • A company may choose to manage assets when legislation dictates or when it is convenient or financially rewarding to do so

This is a chapter from a book entitled “Software Asset Management (SAM) ~ the first ninety days“. I plan to publish each chapter online before publishing the whole book as a low cost ebook or paperback. I welcome your feedback and criticism along the way. Please either leave a comment on the individual chapters or get in touch. A summary of all chapters can be found here.

Logchop Photo credit
Warren Buffet Photo Credit

About Martin Thompson

Martin is owner and founder of The ITAM Review, an online resource for worldwide ITAM professionals. The ITAM Review is best known for its weekly newsletter of all the latest industry updates, LISA training platform, Excellence Awards and conferences in UK, USA and Australia.

Martin is also the founder of ITAM Forum, a not-for-profit trade body for the ITAM industry created to raise the profile of the profession and bring an organisational certification to market. On a voluntary basis Martin is a contributor to ISO WG21 which develops the ITAM International Standard ISO/IEC 19770.

He is also the author of the book "Practical ITAM - The essential guide for IT Asset Managers", a book that describes how to get started and make a difference in the field of IT Asset Management. In addition, Martin developed the PITAM training course and certification.

Prior to founding the ITAM Review in 2008 Martin worked for Centennial Software (Ivanti), Silicon Graphics, CA Technologies and Computer 2000 (Tech Data).

When not working, Martin likes to Ski, Hike, Motorbike and spend time with his young family.

Connect with Martin on LinkedIn.

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