Pre-owned hardware is any equipment which is not sold as new directly from the manufacturer or channel partners. Many vendors, companies and auctions use varying terminology, including “re-certified”, “used”, “refurbished”, “new-in-box”, “new-open-box”, “UC Guaranteed Pre-Owned and “the secondary market”. While they are often used interchangeably, many factors dictate what exactly is being sold.
An incredible array of organizations from both the public and private sector are buying pre-owned. These organizations include global public commercial enterprises, small businesses, ISP’s, telecoms, non-profits, local & US government, military and educational institutions of all kinds.
Although many manufacturers have down played the market’s growth, tremendous demand has given rise to a nearly three billion dollar market, with thousands of sellers, companies and eBayers. Finding a reliable vendor can be a daunting task for any network administrator looking to reduce costs.
This uncertainty and lack of knowledge is exactly what led us to create a small FAQ back in 2000, when the market was in its infancy. Since then, our guide has seen nine revisions and over 54,000 downloads.
An overwhelming majority of the customers we’ve surveyed mention the same fact - they just didn’t know pre-owned was a real, safe and viable option. Significantly lowering networking costs seemed like an unattainable goal, until they discovered the pre-owned market through research and experimentation.
In this guide, we’ll present you with critical information you need to make the switch, become a pre-owned evangelist and start saving instantly.
“A CIO.com (CIO Research Reports) survey found that the majority (77%) of companies surveyed buy second-hand or pre-owned IT equipment, including PC’s, servers and networking hardware, and close to half of the respondents expect to increase their spending on pre-owned IT products in the next 18 months.”
Companies of all sizes continually upgrade and de-install network infrastructure to meet the changing needs of their customers, employees and suppliers. Manufacturer trade in programs are often inadequate and offer customers little financial incentive for prolonging their hardware’s lifespan. Thus, millions of dollars of useful network hardware enters the secondary market annually.
Equipment leases typically range from one to three years, leaving the lessor with functioning hardware well before the end of lifespan.
Distributors, enterprise, government and military institutions purchase large quantities of equipment in bulk. Their inventory often exceeds their needs, resulting in warehouses worth of unused equipment. This was evident during the dot-com bust, when CIO’s flush with venture capital cash irresponsibly stocked up in massive quantities. While network managers today attempt to manage spare inventory thriftily, spares for redundancy and disaster recovery are still an executive priority. This leads to the annual sale of huge lots of unused equipment simply because they were not needed.
A tremendous surplus of new and pre-owned equipment emerges from companies burnt in bankruptcy, such as Lehman Brothers, Washington Mutual, General Motors, Conseco and Circuit City. Businesses undergoing mergers, acquisitions, relocations and downsizing also result in large quantities of unnecessary equipment. These are sold in volume at high discount to the secondary market.
“Gartner Group estimates that the secondary market for networking equipment and accessories has grown over the past several years from a handful of providers to more than 400 companies with an estimated collective revenue of $2 billion to $3 billion.”
-- Government Procurement Magazine
While the terminology for pre-owned varies from seller to seller, the important factors to consider are not the seller’s choice of words, but rather their reputation, experience, processes and policies.
When considering a seller, ask these questions ...
Manufacturers often create obstacles to discourage sales of pre-owned products. Cisco has been specifically criticized for not honoring software upgrades for products purchased without SMARTnet, their proprietary maintenance contract program.
To compensate, secondary market sellers have made great strides by providing comparable services at almost half of manufacturers’ current rates. Sellers offer included warranty periods and next-day faulty hardware replacement, as well as optional maintenance contracts, consulting services and various tech support packages.
A free 90-day warranty is standard, similar in length to most manufacturers’ warranty periods. Many vendors include a free one-year warranty and a select group of sellers are now offering a free one year warranty. Extensions for longer periods are also usually available at a fee.
Many sellers offer protection covering hardware failure and malfunction. Verify processes are in place for identifying and troubleshooting faulty hardware, arranging for next day replacement and when requested, allow refunds or accept trade-ins for credit.
Support options vary from seller to seller. Two main types of support are:
Support packages vary based on time, usage and complexity.
China’s policies regarding intellectual property infringement and state-sanctioned piracy have become a growing global concern. Tremendous growth of the network hardware secondary market, as well as an upturn in Chinese manufacturing have combined to push these fears to new heights.
Back in 2005, the situation hit a peak when the term “Chisco” was coined - counterfeit Cisco equipment originating in China. According to a white paper by AGMA and consulting company KPMG that year, counterfeit products accounted for nearly 10% of the overall IT products market. Network managers shied away from pre-owned hardware simply because it was too difficult to identify counterfeit equipment.
However, a recent flurry of increased awareness and information has helped instill a confidence in the pre-owned market. In a recent survey, UNEDA, the United Network Equipment Dealer Association reported only 40% of respondents noted the identification of counterfeit equipment as a tough issue, down from 50% two years ago.
In this guide we present the latest information available, made public by a handful of resellers and industry sources determined to combat counterfeiting and prove the legitimacy of the secondary market. “Our organization, along with many others, have kept this information private for fear of tipping off counterfeiters and assisting them in perfecting their efforts, “ explains Steven Dale, Web Director at UsedCisco.com.
“We’ve decided to adopt a new strategy. By disseminating this information, we feel the benefits will outweigh the perceived risks. This is similar to the controversy that initially surrounded the practice of publicizing network security vulnerabilities. The first whistle blowers were frowned upon until it became clear that their information forced manufacturers to react quickly.
The net result was a level of quality that never would have been reached otherwise. It’s an external constant, a system of checks and balances. Here too, vendors, customers, and especially manufacturers must react to these challenges rather ignore them.”
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“ICE and CBP seized more than 74,000 counterfeit Cisco networking products and labels with a retail value of more than $73 million.”
-- U.S., Canadian Agencies Seize Counterfeit Cisco Gear : itworld.com
For most buyers, visual inspection before purchase isn’t an option. This fact alone emphasizes the need to buy solely from credible sources which require proof of original ownership for all incoming inventory. In situations where goods bought from eBay or other questionable sources are suspected as counterfeit, a basic understanding of identifying factors is critical.
Buying secondary network hardware is not a risky endeavor for the educated buyer. Here are a few tips you need to help locate a qualified reseller.
Be vigilant about who you purchase from. Make sure you use a reputable reseller — this includes getting the company’s history in business, references and warranty replacement policies. Avoid buying via eBay, deal directly with resellers who have a long and good standing history in the industry and a written replacement policy guaranteeing the authenticity of their products.
The best indicator of a fake is consistently going to be price. A 50% to 95% discount off list price is standard for pre-owned equipment. However, a red flag should be raised if you are being quoted similar discounts for new equipment, sealed in the manufacturer’s box.
Make sure you are being quoted a fair and realistic price. Expect a reasonable discount, but too big of a discount is a sure sign of trouble. Remember the old adage, ‘If it seems too good to be true, it often is.’
Contrary to popular belief, refurbished or reconditioned secondary market technology presents no greater risk than new equipment. Quality control programs and warranties or maintenance initiatives offered by most providers mitigate the risk.
“In two years, we’ve driven out about a quarter of our operational costs,” says the CIO of Tenneco Automotive, a $3.5 billion auto parts manufacturer in Lake Forest, Ill. “I told a CIO about that, and he thought I was joking. I’m not ... A large part of that savings has been leveraging the secondary market.”
-- Good Stuff Cheap : CIO.com
While market conditions affect pricing daily, you can generally expect to save between 50% to 90% off list price. Here is a cost-benefit analysis for three sample networks.
Based on recent UsedCisco.com pricing, subject to change. Unavailable items (N/A) are calculated as list price in total analysis.
|Qty||Part number||List price|
|Small office: 1-10 users|
|1||Cisco 1721 Router||$ 1,195||$ 54||95 %|
|1||Cisco PIX-501-BUN-K9 Firewall||$ 595||$ 145||76 %|
|1||Cisco WS-C2950-12 Switch||$ 895||$ 87||90 %|
|PACKAGE TOTAL (all quantities) :||$ 2,685||$ 286||--|
|TOTAL SAVED : $2,399|
|Small office: 1-10 users|
|2||Cisco 3745 Router||$ 12,000||$ 325||97 %|
|1||MEM3745-128CF 128MB Flash||$ 700||$ 62||91 %|
|1||MEM3745-256D 256MB DRAM||$ 2,000||$ 133||93 %|
|2||Cisco WIC-2T Card||$ 700||$ 91||87 %|
|1||Cisco PIX-515E-UR-BUN Firewall||$ 6,995||$ 670||90 %|
|1||Cisco PIX-515E-FO-BUN Firewall||$ 3,000||$400||87 %|
|2||Cisco WS-C3560G-24PS-S Switch||$ 5,595||$ 3,158||44%|
|1||Cisco CISCO2811||$ 2,495||$ 1,125||55%|
|10||Cisco CP-7940 IP Phone||$ 545||$ 100||82 %|
|PACKAGE TOTAL (all quantities) :||$ 57,230||$ 6,064||--|
|TOTAL SAVED : $51,166|
|Large office / datacenter: 100+ user|
|2||Cisco 7206VXR/NPE-G1 Router||$ 22,000||N/A||--|
|1||Cisco PIX-525-UR-BUN Firewall||$ 12,995||$ 500||96 %|
|1||Cisco PIX-525-FO-BUN5 Firewall||$ 5,000||$432||91 %|
|2||Cisco WS-C6509 Switch Chassis||$ 9,995||$ 261||97 %|
|2||Cisco WS-SUP720-3BXL Engine||$ 40,000||$ 14,075||65 %|
|3||Cisco WS-X6348-RJ-45 Switch||$ 12,995||$ 75||99 %|
|1||CISCO2821 Router for IP gateway||$ 3,895||$ 1,239||69 %|
|1||Cisco MCS-7825-H1 MCS||$ 9,000||N/A||--|
|100||Cisco CP-7960 IP Phone||$ 645||$ 139||79 %|
|PACKAGE TOTAL (all quantities) :||$ 278,365||$ 97,968||--|
|TOTAL SAVED : $180,397|
Rapid technological change, low initial cost and even planned obsolescence have fueled a high rate of turnover for network hardware appliances, creating a fast-growing problem around the globe.
According to an EPA study in 2005, 1.5 to 1.9 million tons of e-waste are created annually. Accumulated e-waste is often processed in poorly managed facilities in developing countries, leading to significant health risks and causing a major negative impact on the environment.
The problem is growing at an alarming rate overseas, as lower environmental standards and working conditions in China, India, Kenya and elsewhere have led to an exponential influx of e-waste, often entering through illegal channels. The majority of e-waste ends up being broken down by ill-equipped laborers working under hazardous conditions.
A typical router or switch may contain more than 2 percent lead by weight and up to 38 separate chemical elements.
After many delays, The European Union’s Waste Electrical and Electronic Equipment (WEEE) regulations governing the safe disposal of IT equipment were finally passed into law. The new legislation went into effect July 1st, 2007, and since countries like England have reported mixed results, stating businesses have an increased awareness of the e-waste problem and regulations, but are still unsure how to act.
Under these new laws, electrical and electronic producers, rebranders and importers must pay for the responsible disposal and recycling of their goods. The first of its kind, but certainly not the last, the WEEE directive is setting the stage for future legislation. Similar regulations are now being considered in the United States, as Congress debates a number of e-waste solutions.
In 2005, members of Congress formed an “e-waste working group,” hoping to jump-start a federal recycling system. The head of that group, Rep. Mike Thompson (D-Calif.), proposed a bill called the National Computer Recycling Act, requiring a fee assessment for retail sales of certain electronic devices to help fund a national recycling program. The bill is still under review.
In the interim, thirteen states have agreed to e-waste laws, including California, Washington, Maine, and Minnesota. Support among other states is growing, in addition to new research initiatives. In September 2007, the Green Chemistry Research and Development Act was proposed, looking to authorize $165 million over three years for research into products that reduce or eliminate hazardous waste. This bill also awaits a Senate vote.
While e-waste awareness has finally attracted government attention, the simplest solution is often the most easily overlooked - prevention. Reuse has become a focal point in the effort to combat e-waste, primarily in the consumer space where organizations are spearheading change well ahead of legislation. Many electronic consumer manufacturers, including Apple, Dell, HP, and Sony have recently established trade-in and recycling programs.
Garner estimates one in every dozen computers used worldwide is a “secondary computer,” and nearly 152.5 million used systems are shipped annually. The research firm predicts that both the home and professional markets for secondary PC’s will continue to see growth in the next several years, fueled by better performance, longer system life and recycling legislation that would give companies greater incentives for reuse and recycling.
Buying pre-owned hardware is not only a cost effective way to reduce IT costs, it is also perfectly aligned with e-waste reduction. Organizations of all kinds can benefit from reuse, in ways that tangibly affect the bottom line and help save the environment.
"Gartner estimates the energy from manufacturing, distribution and use of information and communications technology emits approximately 2 percent of total global carbon dioxide, equal to the emissions from the entire airline industry."
-- Gartner analyst Simon Mingay
Founded in 1996, UsedCisco.com is the world’s largest online network hardware outlet, offering thousands of network hardware products at significant savings off list price. Our inventory includes the most popular Cisco switches, routers, firewalls, VoIP and wireless products, as well as thousands of hard-to-find modules, memory and cables. Each unit is fully tested and guaranteed as functionally new and carries a free, one year warranty.
While green initiatives have only recently gained popular favor, Reuse & Green Your Network™ have been our mainstay ideals since inception. UsedCisco.com is a fully committed environmentally-conscious operation, from energy saving light bulbs in our offices to every order’s recycled packaging. Our entire business lies on the concept of reuse and a mass reduction of e-waste. By supporting us, you are a real and active part of the solution.
Every unit we stock is UC Guaranteed Pre-Owned, undergoing a grueling 28-point testing and upgrading process. Electronics, connectivity ports, memory configuration, firmware, and cosmetic condition are all carefully tested, upgraded and corrected. Our success stems from this meticulous process, and we are proud to have one of the lowest RMA rates in the industry. Don’t take our word for it - read a handful of our testimonials and browse a sample of our growing customer below.
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