As I made the rounds on the Interop Spring 2009 show floor in Las Vegas, it was great to see that despite our ongoing economic challenges, many attendees were evaluating the latest technology options and discussing hot topics, including virtualization, cloud computing and unified communications.

Equally encouraging was speaking with network managers who recently had turned to the secondary market for more affordable, reliable equipment procurement and alternative support options. As I spoke with my colleagues from the United Network Dealer Association (UNEDA) during our first outing together as an Interop exhibitor, it became even clearer that businesses of all sizes and types are increasingly interested in what the secondary market has to offer.

In spite of lower attendance at Interop this year, as NetworkWorld has reported, the NHR booth and the UNEDA booth enjoyed brisk traffic. This point was underscored by Rivka Gewirtz Little from SearchNetworkingChannel.com, who wrote about “the steady foot traffic at the UNEDA booth from start to finish of the show… It’s safe to say a number of neighboring vendors didn’t have the same success.” She went on to address the competitive threat posed by used network equipment dealers, which was confirmed by Cisco partners reporting increased competition from used resellers since the start of the recession.

The UNEDA 2009 Membership Survey also revealed continued market traction despite the troubled economy, as more than three-quarters of those polled said they expected an increase in business in 2009. Additionally, we’re all experiencing more activity from larger enterprises, most notably from the financial services, banking and insurance sectors. Not surprisingly, high-tech and telecommunications companies remain big supporters of the secondary market as they were among the first to recognize this channel’s undeniable value when purchasing equipment and technical support.

While the prospect of significant savings may be what brings new and bigger customers to our market, what keeps them coming back—and provides the lifeblood of the alternative channel—is responsiveness, product availability and rapid equipment delivery.

These traits certainly have been central to NHR’s continued success, which just earned us a coveted spot for the second consecutive year on the prestigious VAR500 list. Repeatedly being recognized by Everything Channel as one of North America’s top technology providers shows how far we’ve come in the past two decades. This latest achievement, along with a strong secondary market presence at Interop, are shining moments for an industry segment that continually fights for its rightful place as a legitimate, viable channel option.

An unwavering focus on bleeding-edge technology often kept most financial services organizations out of the market for pre-owned gear… until now. As this beleaguered segment endures a self-inflicted makeover the reasons for which have been splattered across the headlines for months, one of the changes afoot is growing interest and interaction with the booming market for pre-owned networking equipment.
One aftereffect of the implosion at so many financial institutions, including Citibank jettisoning almost 75,000 employees while such as rivals Citigroup, Goldman Sachs and Merrill Lynch & Co. also are forced to make deep cuts in response to their irresponsible ways, has been the bounty of last-generation network equipment that has become available. Asset recovery operations throughout the pre-owned market are working overtime assessing, gathering and refurbishing gear that has become surplus as the former “fat cats” trim down in an all-out effort to survive.

Anyone looking for the silver lining in this rainstorm on Wall Street will find it’s that inventories of pre-owned gear are at all-time highs. As inventories go up, prices in the secondary market go down, so there are some amazing bargains to be had. The sweet spot—gear that’s only a half- to one-generation old—is at least 50 percent off what a financial services company might have paid for it.

One of the upsides of the money centers remaking and rejuvenating themselves has been a strengthened relationship with the secondary market. When the time comes for these realigned entities to get back on the buying side, it is not unrealistic to believe the cemented relationships formed on the asset recovery side will come in handy when the time is right for business expansion once again.

When the “dot com” bubble burst some eight years ago, one of the few upsides was the massive amount of pre-owned networking equipment that suddenly became available. As scores of ecommerce and telecom service providers struggled, they turned to the secondary market to offload their extraneous equipment. As a result, the entire market felt a catapult-like effect as the instant spike of refurbished gear filled inventory levels to an all-time high.

One of the lessons learned then, and we’re reliving it again now, is that when the business climate is experiencing a great upheaval, there’s no better time to rethink the ways we are doing business. In particular, today’s turbulent times represent a most opportune moment for companies to revisit their network equipment procurement strategies. From all reports I’ve seen, the aftereffects of the next catapult are likely right around the corner as economic forecasts predict persistent gloom through 2009.

Still, there is a silver lining and savvy companies will prepare themselves to take advantage of it. Simply put, the gloomy economy seeds a buyer’s market where more pre-owned equipment is available than ever before. With supply levels brimming in most secondary market inventories, customers are already benefiting from the combination of increased availability and low prices on equipment ranging from new-in-box switches to end-of-life routers.

There is also good news for companies that must downsize. The secondary market is your best outlet for scoring maximum value on unwanted or surplus gear. Asset recovery programs provide the highest value for remarketable equipment while also offering uninstall, package and shipping services. And with buyers clamoring for more equipment, the push is on to keep inventory on hand.

It’s been repeated a lot lately that the best time to invest in your business is during a recession. When your budget is squeezed to the brink and every move is under major scrutiny, there’s no better time to look for ways to maximize your available dollars. Whether buying or selling equipment, the catapult effect makes the secondary market for network equipment a welcome outlet.

To provide some early propellant, here are five things I think every network manager should revisit with a new “creative” perspective when looking to uncover some untapped sources of budget dollars…

• Check status on product warranties and maintenance contracts: In particular, keeping Cisco equipment that no longer requires firmware updates on SMARTnet maintenance is a giant waste of budget dollars. NHR’s NetSure program offers 24×7 technical support and next-day hardware replacement at more than 50 percent off OEM contracts.
• Do something with unneeded gear: Instead of letting decommissioned gear collect dust, trade it in to collect a maximum return. NHR, like most secondary market companies, has an asset recovery program that offers cash, credit or “trade up” exchanges for gear that could be useful right now.
• Fight refurb prejudice: Even if your network is state-of-the-art, does that mean all your network spares must be new-in-the-box? A great budget-saver is to keep refurbished spares on hand instead.
• Do not accept OEMs’ hastening upgrade cycles: OEMs have been known to boast that their equipment can last a decade or more. So why have their upgrade cycles been steadily accelerating to where it seems a new product debuts every 18 months? It’s possible to save valuable money by extending the life of existing network elements. This approach, coupled with an alternative maintenance program, sustains network uptime with noticeable budget relief.
• Join the “third party” party: Opting for components from a third-party is about choice and flexibility. More and more end-users have already realized substantial savings from utilizing generic products. Take memory, for example. OEMs and secondary market companies buy memory from many of the same sources, yet OEMs recommend their customers only buy memory that bears its name. But why pay up to 500 percent more for that private-label memory when you can save up to 90 percent on third-party memory?

These are just a few ways that network managers can get creative right now while achieving unprecedented returns on ever-shrinking IT budgets.

While the overall economic forecast is calling for an extremely cold winter, activity in the market for pre-owned networking equipment is heating up. In my job as brokerage and acquisitions manager at NHR, I understand why these two contrasting conditions are closely related.

When the economy downshifts, causing companies to downsize or reorganize, an influx of equipment typically floods the market for pre-owned gear. In this “buyer’s market,” scores of quality, refurbished equipment can be purchased at exceptional savings. So, shoppers looking to get a jump on next year will find great deals right now on everything from current Cisco technologies, to previous generation and end-of-life. Based on the laws of supply and demand that guide this industry segment, the hottest Cisco products on the market currently include:

• WS-SUP720-3BXL
• WS-X6748-GE-TX
• WS-SUP720-3B
• NPE-G2
• NPE-G1
• WS-X6704-10GE.

To put things in perspective, a Cisco Supervisor Engine (SUP720) carries an OEM list price of about $40,000. While the average Cisco customer would pay between $22,000 and $24,000, you can find it on the secondary market now for $12,000. You do the math; perhaps buy a spare while you’re at it.

It’s not surprising that the fastest movers on our list come from a vast inventory of Cisco equipment. Currently, there’s a glut of some equipment that wasn’t even readily available last year. For example, demand for specific Gigabit and 10 Gigabit Ethernet blades, such as Cisco’s 6704 10GE four-port blades, continues to climb. We are also seeing a lot of demand for older, 10/100 Mbps blades as they are particularly good for SMBs. Right now, there are also great deals on the most popular equipment from other manufacturers, such as Juniper and Extreme.

In addition to great savings, don’t overlook the fact that providers of pre-owned gear typically can deliver equipment the next day. Try that with your OEM. Also, many secondary market outlets offer assembled, tested and configured equipment, which deliver huge time savings for resource-constrained IT teams. When supply is high like it is now, it’s a good time to take advantage of the secondary market to support a network upgrade or stock a few extra spares. Doing so will help you capitalize on significant savings while maximizing your budget for network expenditures.

Increasingly, there also are more viable channels for buying top-quality network gear. Thanks to a burgeoning secondary market, affordable choices are prevalent and well-established companies have large volumes of inventory to meet a wide range of production network, testing and sparing requirements.

NHR warehouses more than $200 million in equipment—at prices up to 90 percent off OEMs’ list—including all the most popular gear from Cisco, Juniper, Foundry and Extreme. So whether you’re looking for a dozen Cisco Catalyst 6500 series switches or one Juniper M-series router, we can get it to you overnight—typically a much faster response than the four-to-six week wait with most new equipment from the primary channel.

When I speak with customers, I always hear a common theme: time is money and waiting is unacceptable, regardless of whether they’re dealing with a planned network expansion or an unexpected network outage. So if an unforeseen outage occurs, don’t let the OEM answer the call with a pricey, forced migration to the latest generation gear just because they typically stock only a small amount of past-generation products. Instead, the secondary market will provide an immediate remedy as well as cost-effective relief for your beleaguered budget while also avoiding additional training or ramp-up.

The power of choice now also extends to maintenance and support. Instead of leaving your network edges unprotected in budget-crunched times, more organizations are embracing highly economical alternative support programs. As result, gear that no longer requires firmware or software upgrades can be safeguarded at huge savings over SMARTnet offerings.

The advantages go beyond saving money. When one NetSure customer recently called for assistance, we could not unconditionally determine whether a faulty card or chassis was the cause of the problem. So we overnighted him both pieces, covering all the bases while guaranteeing restoration of network operations. He was impressed; we were just doing our job. But he knows when it came to purchasing quality networking equipment and support at a price he could afford, he made the right choice.

The Briefcase represents Network Hardware Resale’s entry into the blogosphere—our opportunity to engage in an online conversation about the networking industry and specifically, the growing market for pre-owned equipment and third-party maintenance. There are a lot of questions and controversies surrounding the secondary market and we plan to offer our unique perspectives while dispelling myriad myths and misconceptions along the way.

Our goal is to help our thousands of customers worldwide as well as prospective customers, partners and industry observers gain fresh insights into the changing network landscape while offering pragmatic advice for maximizing constrained technology budgets during challenging economic times. That’s a pretty worthy goal, especially now that everyone is being asked to do more with less. Fortunately, over the past two decades, we’ve learned a great deal about how to build and support best-of-class networks without overwhelming support teams or overburdening budgets.

There’s never been a better time to rethink traditional network procurement and support strategies. To that end, we’ll question conventional wisdom, challenge forced-upgrades from OEMs and share real-world examples from a growing global cadre of network-savvy organizations.

To keep the conversation flowing, I’ll ask various members of the NHR family to provide their thoughts and ideas as well as their latest take on issues that we believe are crucial to business leaders and technology executives. As a result, our Briefcase blogs are apt to take many different forms—news, suggestions, observations, customer stories, analysis, rebuttal. We also welcome your feedback along with suggestions on topics you’d like us to address. We’re always looking for creative ways and new ideas that break the mold when it comes to building and maintaining leading-edge networks that drive successful businesses of all sizes, kinds and types.

Again, welcome and let’s get the conversation started.