Author - Brent Eaton

Zeriva Pre-Owned IT Hardware

Fortune 500 IT Solutions without the Fortune 500 Budget

Cisco Buyers Guide

1. Can I buy used Cisco hardware?

Used Cisco hardware is available through a variety of channels.  High demand for these products is thanks in part to a tremendous product expansion and overall Cisco reputation.  This growth has resulted in a nearly $12 billion 5 secondary market for Cisco. The secondary market provides thousands of sellers of used equipment and connection with customers of all types.

2. Who, what, where, when and why of pre-owned Cisco equipment:

1. Who provides used Cisco equipment?
   1. Independent Cisco resellers (Secondary Market)
      Independent Cisco resellers typically offer a broad selection of Cisco products. They obtain used and new-surplus/surplus equipment from other sources. The breadth and depth of their inventories typically exceed current product availability through Cisco; and prices are usually very competitive and often well below new prices (potentially up to 90% off list pricing). A quality reseller maintains an extensive testing and refurbishment process (link to refurb process) that is backed by a warranty. Warranties may range from a product lifetime to only a span of 90 days. Alternatively, there are third party maintenance options that can provide both software and hardware support at discounts ranging from 30-50% less compared to SMARTnet.
   2. User-to-user Cisco resellers
      Companies (buyers) source used Cisco equipment directly from other users. These resellers are typically end users who sell products through auction sites like eBay.  Due to exponential growth and demand, there is a large volume of Cisco equipment for sale on these auction sites which provokes the old adage: buyer-beware. While price points can be enticing, there are risks due to unpredictable pricing, threat of sub-standard devices, no testing procedures, and lack of warranties and/or poor packaging. It is recommended that buyers research the product(s) and seller before making a transaction. It is wise not to rely solely on a seller’s rating, but it may provide legitimate feedback from the experiences of other buyers.

• Cisco Authorized Value Added Resellers (VARs).

VARs are authorized Cisco partners, and generally sell new hardware through Cisco’s distribution channels. They also have access to Cisco’s Certified Refurbished product line. This refurbished equipment is certified, and is “relicensed” by Cisco. SMARTnet maintenance is also available through the same authorized channels. There are two disadvantages that the VARs face when selling the Certified Refurbished product:  (1) availability is confined to distribution stock, and (2) the expected savings of a refurbished purchase may be nominal compared to what the potential buyer may find on the secondary market.

1. What is pre-owned hardware?

Pre-owned Cisco, or Pre-owned IT hardware for that matter, is hardware originally purchased by an end-user and resold to another party. The vast majority of this hardware is purchased new. There are a few industry standards to classify the condition of the hardware that is being sold. These standards can include:

• Used: This is hardware that has been pulled from a working environment. The best description is the hardware you are currently using.
• Refurbished: This is hardware that has been taken from a used stasis and tested, cleaned, completed and repainted. The end product you will find from a quality reseller.
• New Pull: Hardware that has never been used but is not in the original package.
• Factory Sealed or New in Box: New hardware that has never been opened. It’s in the same condition as if it shipped direct from Cisco.
• New Open Box: This describes hardware that is in its original packaging. The serial number of the machine must match the label on the box, it has all the accessories and it’s never been used. Often times a reseller will power on test the machine to insure that it is in proper working condition
• Certified Refurbished: This is the “re-man” brand from Cisco that we covered above.
• Gray Market: Ah, the ambiguous “gray market”. We’ll discuss this OEM FUD favorite a little bit later.

1. Where does it come from and is it safe to buy?

Pre-owned equipment typically comes from several sources:

• Lease Returns: Leasing of network equipment is big business. Because of this a large number of Cisco equipment hits the secondary market once its lease term matures. Most lease terms range from one to three years, the equipment is usually still current and in high demand with corporate IT departments. Reputable resellers partner with leasing companies and purchase it directly from them when it comes off lease.
• Internal IT Refreshes: When manufacturers declare equipment end-of-life, end-of-service, or retired, many customers upgrade or replace hardware – even if the existing devices have many years of useful service remaining. Secondary market providers acquire the equipment and refurbish it to like-new condition, passing the value on to customers looking for used equipment that performs like new but costs significantly less.
• OEM Trade-In Programs: The OEM often uses a trade in program to offer discounts on new hardware to customers. This hardware can be redistributed to the secondary market due to the OEM offering an inadequate ROI or the OEM reselling the hardware to the secondary market.
• Manufacturing Overruns/Stock Rotations: Products that have never been used and are still in their original packaging. Independent resellers purchase excess inventories of equipment in bulk from distributors, corporate users and government organizations.
• Bankruptcies/ Corporate Liquidations: Large quantities of Cisco products enter the secondary market at tremendous discounts as the result of mergers, acquisitions, bankruptcies and corporate liquidations.
• Canceled Orders: Equipment that was previously sold to a customer that couldn’t be returned.
• Customers Like You: Much used equipment reaches the secondary market from customers like you who upgrade to new equipment or de-install network gear that no longer meets their needs.

1. How long does it take for new Cisco technology to reach the secondary market?

A large percentage of hardware that reaches the secondary market is generated by end of lease terms. The typical lease cycle is 2-3 years, but it is not uncommon to see a new Cisco product available on the secondary market within a few months after initial launch. This potentially could provide a budget break to IT Departments who properly leverage the secondary market. The secondary market is stocked with current and recent generation hardware, but especially so during a slow economic climate due to mergers, acquisitions, bankruptcies, and liquidations.  Another reason equipment makes it to the secondary market is because of purchasing errors.

 Why buy pre-owned?

In today’s economy and given the inherent longevity and reliability of Cisco equipment, the question isn’t why buy pre-owned, but why not? When you purchase used Cisco equipment from a trusted and reliable used hardware reseller, you gain key benefits:

• Cost savings: Depending on the generation of the hardware, savings can range from 50-90% off the Cisco list price.
• Availability (parts and equipment): Maintaining your network no matter how new or antiquated is crucial to the entire enterprise. The availability of the secondary market is a major ally when a hardware or network component goes down; the impact on the entire enterprise is immediate and can adversely affect business and productivity. Some businesses still operate 5500 series chassis which were introduced in the Clinton administration! Resellers have a vast array of hardware and components available to them.
• Speed of delivery: Rapid access to replacements from a reliable used-equipment vendor that can ship overnight or provide service within a couple of hour’s gets you back up and running in no time.
• In House Spares: Often times having a spare on a storage shelf is a better cost alternative to a Cisco SMARTnet contract or even a 3^rd party maintenance contract.
• Quality: A reseller that provides rigorous testing detailed refurbishing and extended warranties can argue that they are providing a more quality product than that of a new unopened machine. These refurbished products have already been in the trenches and proven their dependability in a live network setting. One could make the argument that their technicians have more real world experience with the hardware than the theoretical practices of the OEM.
• More Options: Most used equipment resellers offer both current and previous-generation hardware as options for the same project
• Proven Reliability:
• Better Fit: Newer doesn’t always mean better. Sometimes, proven equipment is a better choice for your business and your application. What’s more when new releases come to market, you may not need the new features. Why pay for them if you don’t need them?
• Compatibility: Replacing an existing network component with the same model means there are no questions about compatibility – you already know it will work with the systems you have in place.
• Minimal depreciation exposure: Just as it makes sense to purchase a quality used car (and let someone else take the depreciation hit), purchasing quality used network gear can minimize your exposure to depreciation.
• Better warranty: While it may seem counterintuitive, you can often get a better warranty through a reputable independent reseller than you can through the OEM
• Improved customer experience: Likewise, you’ll often get better, faster and more personal customer service from a leading independent reseller than from the OEM

2. Is it safe to buy pre-owned equipment?

Given current economic conditions, demand for pre-owned equipment is rapidly growing as network administrators look to reduce overall IT costs. The secondary hardware market brings together thousands of different types of resellers and buying organizations. Buyers include small, midsize and large businesses, Internet Service Providers, telecommunications and utility companies, non-profits, local, State and US government organizations, military institutions, higher education, schools, and any organization whose network administrators are looking to reduce network costs.

Used equipment provides a viable alternative to new – if you buy from an established vendor with a proven track record. In many cases, resellers offer better after-sale support and more robust warranties than manufacturers or authorized resellers.

3. Used Equipment: Separating Myth from Reality.

Misperceptions about used network gear and the secondary market abound. Here are some of the myths about the secondary hardware market – and the reality.

The myth: before buying, many customers were told that used/pre-owned equipment is:

• Broken
• Obsolete
• Unreliable
• Abused equipment
• Sold by the previous owner because it didn’t work
• Stolen
• Counterfeit
• Gray market equipment
• Not intended for the US market
• Not eligible for SMARTnet® support
• Not maintainable
• Not covered by technical support/TAC support
• Without a warranty

The reality: most reputable resellers only sell used equipment that’s in good condition, refurbished to like-new condition, backed by a warranty and rigorously screened for authenticity.

In many cases, the leading independent resellers’ testing procedures for detecting counterfeit goods are more rigorous than OEMs, VARs or distributors. Most secondary marketers put products through extensive testing to ensure performance and authenticity. They also work with anti-counterfeiting organizations to keep counterfeit equipment out of the secondary market. They work diligently with Federal organizations like the FBI and ICE, a division of Homeland Security, to report stolen equipment. Zeriva uses an extensive testing platform that is 90% automated and computer controlled to ensure consistency.

As for warranties, most secondary market suppliers offer warranties that are either longer or more robust than those offered by manufacturers or authorized distributors/resellers. Some offer lifetime warranties which can include the repair or replacement of hardware within days instead of the typical weeks or months that OEMs offer. Zeriva offers a Lifetime Warranty that is called the Forever Warranty.  We will provide coverage for you for as long as you want to keep the equipment in service.

Finally, most reputable resellers offer extensive support performed by highly trained technicians who work with used equipment every day. Pre- and post-sale support encompasses maintenance, repair and even software support.

Again, the caveat – if you’re going to buy used equipment, make sure you work with a reseller with solid credentials, a proven track record and a long-standing reputation for reliability, financial stability and quality.

4. What is the difference between used Cisco equipment and gray market equipment? What is the gray market?

Gray market products are legitimate products that are sold outside the designated sales channel . It is not counterfeit equipment. OEM’s have tried to marry the terms Gray Market and the secondary market to cause confusion and doubt with end-users. That could not be further from the truth. Used equipment is simply hardware that has been repurposed.

5. Why is there a gray market?

Primarily, gray market equipment exists due to a lack of control by the OEM over their distribution channels.  There are a variety of ways that they reach the secondary market:

1. • Distribution overstocks – Manufacturers have too many products to sell within a short amount of time and can’t sell their entire inventory.
   • Canceled orders – The order is placed and then canceled and product enters the secondary market.
   • Geographical price differences – Hardware intended for one region may be sold in another region where the manufacturer may charge a higher price.
   • Canceled projects – The end user buys and pays for gear but doesn’t use it.
   • Bankruptcies – When companies declare bankruptcies and must liquidate, new or un-used equipment may enter the secondary market.
   • Sales promotions – Regions or distributors run promotions to move stock, often times sales reps will sell the equipment in the secondary market

6. I’m concerned about counterfeit products – How do I make sure the hardware I buy is authentic?

Counterfeiting is becoming a growing challenge as more OEMs move their manufacturing overseas.  All manufacturers are dealing with the challenge of counterfeiting, including luxury goods, clothing, small electronics, etc. While most resellers are legitimate, reputable and have strict anti-counterfeiting policies, others are not. AGMA estimates that counterfeit products account for some 10 percent of the overall IT hardware market. Fortunately, heightened awareness and better access to information are having an impact as organizations join together to ensure the integrity of the secondary market. Keep these tips in mind when shopping for used gear:

1. • Only buy from reputable resellers who are members in good standing with anti-counterfeiting and trade associations and have proven track records.
   • If it’s too good to be true it probably is. New equipment at exceptional discounts should raise a red flag. A discount of 50-90% is standard for pre-owned equipment but not for new equipment
   • Buyers should be extremely cautious about buying networking equipment on eBay as it is very difficult to determine its origin.

7. How do I know if a piece of used Cisco hardware is counterfeit?

While visual inspection isn’t always an option – and it’s important to work with a credible source – look for these indicators that a product may be counterfeit:

• Screws: Shiny with imprecise lines and a sandcast appearance.
• Welding: Inconsistent, messy.
• Serial Number Sticker: Sloppy letter spacing, serif typeface (instead of sans-serif), bar codes are not flush with the sticker edge.
• RJ45 Connectors: Flush instead of finely extruded connectors with two (rather than multiple) metal attachments.
• Board Points: The points on the main board are copper rather than silver.
• Packaging: Inconsistent type, no seal identifying weight, low-resolution printing.

1. Holograms: Missing holograms may be an indicator on newer cards. Especially if the card includes copper solder points, no embedded numbers or a red LED holder

How much can I expect to save by purchasing used equipment?

Typical savings are:

• 50-90% off OEM list price for refurbished equipment
• 40-60% off OEM list price for new/factory-sealed/unused/new surplus equipment

Pricing in the secondary market is ruled by the principles of supply and demand. There are situations where pricing for a particular product could see a short term spike. In 2009, after Cisco had drastically scaled back production schedules, the ASA5500 firewall routers saw a large increase in price due to the high demand and limited supply. The shortage lasted around 3-4 months.

10. What types of organizations purchase used Cisco equipment?

Used IT hardware has been a booming business since the late 1960s.  Today, the secondary Cisco market is estimated at $12 billion ⁵ worldwide, serving organizations across the spectrum:

Fortune 500 companies

• Small and mid-size businesses (SMBs)
• Government organizations
• Telecom and utilities
• Universities
• K-12 school systems
• Non-profits

11. Isn’t new equipment better than used?

Depending on the type of equipment you need for your network, the newest hardware may not suit your current infrastructure. In some cases, pre-owned equipment may actually be better suited to your needs by standardizing your current networking environment and reducing your costs.

Benefits of purchasing used equipment from a reputable reseller include:

• Quality control programs, maintenance programs and warranties mitigate risk.
• Warranties are often longer and more comprehensive.
• Proven compatibility with existing parts/components.
• Used hardware has a superior functionality-to-price ratio.
• Used hardware is proven and tested.
• Reputable resellers offer established technical skills.

12. Why does my Cisco representative discourage me from buying used equipment?

Simply Put: Greed. There is the short term fear of losing commission and revenue but more importantly the long term fear of losing repeat business to a secondary supplier. Any sales rep worth his salt, regardless of industry, will disparage sales from another competitor. The fear of losing future business to a pre-owned hardware supplier is a legitimate one. Especially when your sales strategy has been centered on the concept of regular refreshes. Is it not funny that the features he/she was selling you on eighteen months prior are now no longer relevant? They discourage you because ultimately, they fear you will see the value in implementing a secondary market buying strategy to replace or supplement new hardware purchases.

13. When is the best time to buy?

There’s never been a better time to buy used/refurbished equipment. According to a 2006 study, the used hardware market for all IT products was over $300 Billion 5 Worldwide. Inventory is at an all-time high because of the current economic environment. If you’re looking to reduce core networking costs and divert capital to other aspects of your IT infrastructure or business, used networking equipment is an effective strategy.

14. What qualities should I look for in a reseller?
    Reputable resellers share certain characteristics and credentials. Look for:
    

• A good reputation and proven track record. Companies that have been in business for a significant period of time
• A defined quality process for both the testing and refurbishing of hardware.
• A detailed warranty that guarantees their products.
• A defined anti-counterfeit position and process for identifying it.
• Required accreditations and certifications.
• Membership in good standing with trade associations.
• References and customer list.

15. What do the experts think of the secondary market?

Many OEMs actively create obstacles for buyers of used equipment due to the rapid rise in demand and the emergence of thousands of resellers.  Here are some expert assessments of the secondary market:

“Providers of secondary network equipment answer a market need for quality products at reduced costs. Network managers increasingly understand the viability of having an alternate procurement channel. The secondary equipment market is also providing a strong challenge to OEM maintenance and support in terms of quality and cost.”
Eric Goodness, research vice president, Gartner Inc. ¹

“Put the secondary-market gear in operation when you have a problem,” says David Willis, chief of research at Gartner…”Same-day service costs about 20 percent more than next-day, so this strategy could cut your maintenance costs…”
Gartner, April 2, 2007    ²

“Who’s buying used gear? Better to ask who isn’t. The customers of secondhand equipment range from small businesses operating on tight margins to Fortune 500 companies and global telcos.”                                                                                     InformationWeek, July 7, 2007   ³

 “It’s a big deal for Cisco since probably 20 percent of their overall revenue comes from SMARTnet, and support and maintenance.” Resales are “totally legitimate, totally legal. Cisco hates it but there’s nothing they can do about it.”
Mark Tauscheck, senior research analyst, Info-Tech itbusiness.ca, May 29, 2007  ⁴

16. What is the difference between certified pre-owned, Cisco authorized refurbished, clean serial number, new in box, new open box, refurbished and used equipment?

According to the UNEDA [link here] Code of Ethics:

–Certified Pre-Owned:  Sold directly by Cisco or a Cisco-authorized VAR.

-Cisco Authorized Refurbished:  Equipment restored to Cisco CARP standards.

-Clean Serial Number:  The serial numbers does not appear under a Cisco SMARTnet contract.

-New in Box (NIB):  Product is in same condition as if it came directly from Cisco.

-New Open Box (NOB):    The box has been opened and the product is nearly the same as a new in box product.  Sellers should indicate if the inner static bag has been opened to test.  All accessories and packaging are in the package (like if purchased new).

-Refurbished:  Equipment has been restored to good cosmetic and working condition.

-Used:  Equipment has been removed from a working environment and resold (e.g. directly to a user site).  The product is operational; however, it comes with no guarantees in terms of cosmetic condition.

17. What is the difference between a maintenance contract and a warranty?

The difference between a maintenance contract and a warranty are:

A warranty describes the conditions under, and period during, which the producer or vendor will repair, replace, or otherwise compensate for, the defective item without cost to the buyer or user. Often it also delineates the rights and obligations of both parties in case of a claim or dispute.

A maintenance contract on the other hand goes the extra mile.   The primary difference between a maintenance contract and a warranty is the Service Level Agreement (SLA).  A maintenance contract is a predefined commitment to perform a service event within a certain time period.  In the networking environment there are two primary SLAs that are offered, 8×5 Next Business Day (NBD) and 24 Hour by 7 Day by 4 Hour response after problem determination. Maintenance contracts offer varying levels of advanced hardware replacement options from 8×5 NBD to a 4-hour onsite spares.  The options are all available 24×7, where our warranty is limited to 8×5.  If there is a component in the networking environment that goes down, and it is critical to the environment it will require rapid hardware replacement no matter what time of the day or what day of the week, that’s what a maintenance contract offers.

A Warranty is going to ensure that the equipment that you buy from us is always backed, and after verifying that the hardware has failed a replacement will be sent, but if the hardware is critical to the operation of the network environment, a maintenance contract can ensure that you have expert assistance immediately.

18. Are service and support options available if I purchase pre-owned products?

A variety of services and support are available on pre-owned products.  Historically, OEMs deliberately made it difficult to purchase pre-owned equipment by not honoring software upgrades for products bought without maintenance contracts.

To counter this deterrent, many secondary market sellers oblige with comparable, and sometimes discounted services.  Options may include asset management, installation/de-installation, maintenance contracts, network monitoring, on-site consulting, pay-as-you-go support and return material authorization (RMA) programs, technical support and warranty programs.

• Asset Recovery
• Installation
• Technical Support
• Maintenance contracts: Pre-paid, hourly time blocks with a variety of SLAs including phone and email support, next day hardware replacements and conceivable variants such as:
  • 8 x 5 x next business day
  • 24 x 7 x 4
  • Spares Program
  • Custom support
• Rentals
• Configuration Support

19. Do independent resellers offer return policies?

If a purchase is contingent on a company’s return policy, it is best to research the reputation of the seller, determine whether the seller has an established return policy and if so, familiarize yourself with the stated policy.  In many cases, reliable resellers usually offer a return policy that covers hardware failures or malfunctions upon receipt.  It is wise to determine whether the provider has established processes for detecting and troubleshooting faulty products, offers flexible shipping options and, if necessary, the form of reimbursement (e.g.  Refund as original payment).

20. What warranty options are available for used equipment?

Depending on the vendor the warranty can range from 30 days to Lifetime*. 

*Lifetime – the actual terms of a lifetime warranty by provider. Typical definitions include:

• One year advanced replacement
• Five-year non-advanced replacement warranty
• Warranty extends until the product is deemed EOL/EOS by Cisco
• True lifetime warranty

21. Do Cisco secondary market resellers offer installation services?

Some secondary market resellers do offer installation (and de-installation) services.  Typically, top tier resellers offer installation.

22. What forms of payment do secondary market resellers accept?

Most resellers accept several different payment options.

• Automated Clearing House (ACH)
• Pre-Payment via: Company Checks, Cashier’s Checks or Wire Transfers
• Credit cards (American Express, Discover, MasterCard, VISA)
• Credit terms for qualified buyers.
• PayPal secure payments.

¹ Sue Hetzel, United Network Equipment Dealer Association Announces Results of First Annual Survey Revealing Aggressive Growth in the Market for Pre-Owned Networking Gear, BusinessWire, July 11, 2007

² Phil Hochmuth, Cisco takes on ‘grey market’ equipment sales, Network World, April 26^th 2007.

³ Andrew Conry Murray, Used Tech Gear: Notes From The Underground, Information Week,  July 7^th, 2007.

⁴ Jeff Jedras, Cisco still trying to defend its aftermarket turf, itbusiness,ca, May 29^th, 2007

⁵  Trends in Secondary Computer Hardware 2006 to 2009, AME Research BV, 2006.

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