Procurement Trend Report from NHR

According to procurement pattern research involving more than 10,000 global customers, NHR reveals increased buying of Cisco network security products and 10GbE network interface cards on the secondary market as well as increased selling of Cisco Supervisor Engine 720-3B and Cisco Catalyst 6509-E switches.

NHR also reports that after a six-month period of pricing volatility, prices on the secondary market have stabilized, thanks to plentiful supply of, and demand for, fully-tested, top-quality pre-owned equipment.

“We're seeing greater reliance on this alternative channel as savvy IT equipment buyers continue to purchase a combination of new and used gear to get the most from their IT investments.”
- Jennifer Koppy,
Research Manager, IDC
IDC report No. 225573

Top Five Procurement Trends Reinforce Health of Networking Market

1. Cisco network security and firewall products are in great demand:

Rising demand on the secondary market for Cisco's firewall and security products, including the ASA 5500 Series of Adaptive Security Appliances, has been attributed to the company's long delivery lead times due to component shortages early in 2010. While Cisco's nagging problems surrounding equipment delays have subsided, customers are still faced with at least four-week delivery schedules on the primary market. In contrast, most gear on the secondary market is readily available for overnight delivery.

2. Growing migration to 10GbE networking drives ongoing upgrades:

A growing number of organizations are fueling network upgrades to 10GbE, thanks to an abundance of Cisco 10GbE network interface cards on the secondary market. Cisco's WS-X6704-10GE blades are among the best sellers on the secondary market currently. NHR reports that sales of these products grew by 82 percent in 2010.

3. Increased supply of previous-generation Cisco Catalyst 6509-E:

Inventory levels for previous-generation Cisco Catalyst switches, such as the 6509-E, have steadily risen over the past year as companies have restored upgrade plans and begun migrations to newer platforms, including Cisco's Nexus 7000 Series switches. The increased supply is attributed to a re-invigorated interest in asset recovery, where companies unload unwanted or decommissioned gear to the secondary market while the equipment still retains a high residual value.

4. Product pricing has stabilized after months of volatility:

Increased buying and selling of used gear has created noticeable price changes over the past year. In the first half of 2010, prices on the secondary market plummeted following a cycle of restricted buying throughout 2009.

Since June 2010, equipment supplies have continued to grow, which drives more pricing stability. For many providers in the secondary market, equipment supply is at an all-time high, which keeps prices highly competitive.

Most current and previous-generation Cisco gear can be purchased from the secondary market at up to 90 percent less than the cost of new equipment.

As a result, companies favoring the pre-owned market to both buy and sell goods are increasingly likely to realize favorable purchasing conditions.

5. Increased activity levels in the secondary market forecasted to remain through Q2 2011:

There is a forecasted continuation of robust activity through the second quarter of 2011, especially as the uptick in platform migrations and system upgrades should fuel both the supply of previous-generation gear as well as create more demand for current generation equipment.

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