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Hardware Today: Pre-owned Server Purchasing Strategies

By Drew Robb (Send Email)
Posted Jan 31, 2005


Used cars are an accepted part of the U.S. economy. According to a report by Remarketing Solutions, 43 million second-hand cars are sold every year, generating a $366 billion market. It's no surprise, therefore, that the big automotive manufacturers are gradually legitimizing the market via their own "pre-owned vehicle" divisions.

Caveat emptor -- buyer beware -- is an oft-repeated mantra for anyone considering a used car. The same wary eye should be used when looking at second-hand servers.

The same trend is taking hold in the field of pre-owned servers. Even big OEMs like Dell now have authorized pre-owned programs. Enterprises that consider shopping the Dell Outlet may soon say, "Dude, your getting a pre-owned Dell." The section is hard to find on the Dell site (those not in the know can get there only via the search tool; enter "Refurbished Server" and you'll be able to track it down), perhaps because of concern that it might cut into regular sales.

By its very nature, second hand means not top of the line. Thus, what is purchased will have a smaller processor, less RAM, and less functionality than the most current OEM offerings.

By all indications, the used equipment market has blossomed in recent years. Fueled by an IT spending downswing and the continuation of frugal corporate IT spending, used server vendors are now 10 for a dollar. In addition to the well-known players like C-tech and World Data Products, many small and now not-so-small outfits are found throughout the United States.

"We definitely see growing demand for high-quality used servers," said Lilia Petrova, a sales rep at used equipment vendor Technorex. This firm focused primarily on used telecom equipment until a couple of years ago when it began to see increasing interest in aging servers. Technorex offers refurbished goods from the likes of Sun, HP, Dell, and IBM at 25 percent to 85 percent off the list price, depending on the server's age, condition, and features.

By its very nature, second hand means not top of the line. Thus, what is purchased will have a smaller processor, less RAM, and less functionality than the most current OEM offerings. This alone has a strong influence on customer demographics. You won't find NASA purchasers scouring eBay for component computers for a new supercomputer. Nor will you find banks willing to host their transactional processing systems on used Sun boxes.

Which begs the question: Who buys second hand?

"75 percent of our used server sales are to small businesses who simply can't afford to buy new," said Peter Foley, sales manager at Complete Computer Solutions.

His company has been in the used equipment business for eight years. Initially, it concentrated on PCs and desktop systems. Recently, however, there has been an increased demand for servers and storage gear. CCS offers a price regime similar to Technorex based on the age of the hardware. It specializes in Intel boxes from Dell and HP/Compaq but also has a few Sun, Toshiba, and IBM products available.

CCS' Web site lists more than 100 available models. A Dell PowerEdge 2500 with two Pentium III 1 GHz processors, 1 GB of RAM, six 18.3 GB hard drives, a 24x CD ROM drive, RAID, a 10/100 NIC, and loaded with Windows Small Business Server 2000 is priced at $2,100. At the low end, a PowerEdge 2400 with one Pentium III 866 MHz processor, 256 MB of RAM, an 18 GB hard drive, a 40x CD ROM drive, and a 10/100 NIC is priced at $650.

Organizations that buy second-hand equipment must pay attention to what they are buying, as they face greater risks than those that purchase brand new hardware.

Foley notes that the majority of his refurbished servers are bought by two groups: individuals who want to train on server administration, set up a home network, or attain certification; and midsize to large enterprises.

"A couple of years ago, Fortune-500 companies wouldn't even consider buying second hand," said Foley. "But that has changed, and we are seeing more interest due to the savings."

He admits, though, that these enterprises are not deploying such gear in production environments. Rather, they are using it mainly for testing purposes. Technorex has noticed a similar trend.

"Most large companies do not buy used servers for mission-critical applications," said Petrova. "In our experience, they tend to acquire second-hand servers as a backup, for spares to existing equipment, or for other non-critical roles, such as development machines and departmental intranets."

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