San Francisco, CA April 10, 2006

Ask any IT manager what they think about used data networking gear and chances are their eyes will light up. Six years after the Telco bust, the secondary market for IT has grown up and with it companies have grown accustomed to buying used. But with the steep discounts come added risk and buyers are becoming savvy about negotiating the vast, complex market for pre-owned equipment.

Contrary to popular thinking, availability often trumps price as the critical factor for buying used.  While manufactures like Cisco and Foundry Networks commonly stick customers with two and three-week lead times, virtually any piece of equipment can be sourced from the gray market in 24 hours. Of course the discount for used, which ranges from 50-90 percent off list pricing has proved to be the real elixir; coaxing even the most conservative buyers to board the gravy train. According to industry estimates, 70 percent of companies have experience buying second-hand gear today.  What is tricky about the secondary market is finding good gear and buyers have learned a lot about how to protect themselves.

Estimates of the counterfeit and stolen goods trade for data networking equipment run as high as $40 billion, a figure deserving of some scrutiny having been published by the Alliance For Gray Market and Counterfeit Abatement (AGMA) a consortium formed in September 2001 by leading IT manufacturers including Cisco and HP. Whatever the number is, it’s big. And as online market places such as eBay have exploded so has the level of fraud.

Search for “Used Foundry Networks” on Google or eBay and the results are myriad. Hundreds of resellers, predominately in the US, offer used switches, routers, load balancers and firewalls with varying configurations and terms of sale. With eBay’s built-in seller rating system whereby for each transaction, the buyer and seller are allowed to rate each other by leaving feedback, buyers are encouraged to select only the vendors who have a high positive feedback rating (90% and up) and a history of many such transactions.

Buyers have learned that eBay also is a haven for counterfeiters, primarily from China who list new Cisco auctions at irresistible prices. To the untrained eye, these products appear identical to the real thing and in some cases will operate like normal. The trouble comes when the end-user tries to purchase support, known as SMARTnet from Cisco only to learn that the serial number is invalid or doesn’t exist. By that time the seller has his money and has likely changed his identity online. For the customer, equipment failure is imminent and a refund is merely a pipe dream.

A quick Google search for “Used Foundry switches” will garner 1,600,000 results comprising mostly news and other product information together with links to resellers who specialize in the sale of such gear.  While most online users will focus on the organic links, companies with paid advertisements on the right side of a Google results page are considered credible sources as well.

Buyer Beware. Things to consider before buying used:

Run a D&B (Dun and Bradstreet) on the company – D& B hosts a database of over 64M businesses worldwide. Through their Data Universal Numbering System (DUNS) you can access useful information on a company such as names and contact information for their principals, company credit rating, and pertinent financial information. By verifying with D&B, you can be assured that a company is in good standing and is conducting business with fair-practice in mind.

Validate all serial numbers – Serial numbers unique identifiers that are assigned to every hardware unit. By checking a components serial number, you can verify its authenticity and ensure the unit is not stolen.

Verify Warranty terms in writing – As with any big-ticket purchase, it is always important to clearly understand the terms of purchase. Many companies offer a limited warranty that may cover parts, but not labor. With any used product, something that functions perfectly today, may encounter problems down the road. Make sure you understand what condition the unit is in, and whose responsibility the potential repair costs are. Be aware that there are many companies that offer total repair cost warranties to end-users.

Never pay cash – This should be common knowledge, but cash purchases are not as secure as other forms of payment. Credit cards, wire transfers, and checks all provide a record to a company and bank account. This will provide you with a paper trail to a specific person or business should there be any disputes or legal issues that come up.

Picking up the phone and calling a brick and mortar business is always the safest way of purchasing equipment but it doesn’t guarantee a buyer will not be defrauded.  There are hundreds of trusted resellers in North America with a range of scale and expertise. Most firms will accept credit cards, wire transfers, and Paypal. A quick scan of a website will provide some peace of mind but buyers today understand that the more information they can glean on a vendor, the better they will sleep at night.