Hardware Today: Second-Hand Server Strategies

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

Back in the roaring '90s, the trend was to get rid of all aging boxes and load up with the latest and greatest. The early day of the 21st century, however, have been a period of more conservative hardware policy. Gone are the two-to-three year hardware refreshes and the sweeping decisions to abandon all "legacy" hardware. In its place is more of a tiered strategy toward hardware — buy the best and fastest for only priority applications.

Buying a second-hand server is one way for enterprises looking to save cash and protect their investment. Plotting a smart strategy is critical.

"Don't buy second hand if you need full mission-critical support," cautions Clive Longbottom, an analyst with U.K.-based Quocirca.

For routine or low-priority tasks, however, it often makes sense to make use of older models. This is especially true when enterprises chose to remain on a specific platform. Such an approach reduces the need to hire in new skill sets and greatly extends the lifespan of hardware.

"Used equipment is particularly suitable for enterprises that have made investments in prior-generation technology and want to remain on that platform or software revision, or when there is uncertainty or delays surrounding the upgrade path for older technology," says Francis O'Brien of Gartner.

One big location for the burgeoning refurbished server market is eBay. Thousands of people now make a living buying and selling hardware online. A Sun 220R, for example, sells at around $1,000 on eBay. Other refurbished deals include an HP 9000 1600 server for $295, a Dell PowerEdge 2400 for $335, and a Relion Xone 2U Rackmount Server for $1,500.

For enterprises that prefer to bypass the middleman, two resellers are C-tech and World Data Products (WDPI). WDPI, is one of the largest in the field. It sells Dell, HP (including HP 9000 and HP/Compaq), IBM (including iSeries, AS/400, pSeries, RS6000, xSeries, and Netfinity), Sun and Cisco equipment second hand.

"Many companies are establishing the business practice of utilizing midlife refurbished hardware where the latest in technology isn't required," says Bruce Caswell, vice president of marketing at World Data Products. "They avoid the higher costs and rapid devaluation inherent in new equipment."

In Caswell's experience, the savings can amount to up to 60 percent, depending on the type and currency of the equipment. Like most refurbishers, WDPI gets most of its inventory from enterprises that want to offload gear to bring in new boxes or standardize on a specific server platform. Like car dealerships, they pay a trade-in fee, which takes the old model off your hands so you can buy new goods without having to spend as much. And, like when dealing with used car dealers, in particular, enterprises must be careful about what they purchase. It's best to check out the processes vendors follow when reclaiming old servers, and ensure a 90-day return policy is in place, should you end up with a lemon.

WDPI puts all of its gear through an extensive examination that includes auditing, testing, cleaning, reconfiguration, and packaging. Similarly, Complete Computer Solutions (CCS) of East Walpole, Mass., performs such actions before selling customers any of its Intel-based systems from Dell and HP/Compaq, as well as systems from Sun, Toshiba, and IBM.

"When we find a good second-hand machine on the market, we audit it and reconfigure it to make it more sellable," says Peter Foley, sales manager at CCS.

Spare Parts

Another reason to buy second-hand equipment is for spare parts. This is most important with lines that are no longer manufactured or are about to be retired. Enterprises with AlphaServers, for example, would be wise to pick up (or hang onto) another machine, as parts will eventually become hard to find. This also applies to products such as those in SGI's Origin line and those running HP Tru64.

"Frequently, used equipment is also purchased for spare parts or replacement machines on site, and for enterprise disaster recovery initiatives," says Gartner's O'Brien.

Disaster recover may be on most priority lists, but funding is not always forthcoming. One way to reduce costs is to use older machines at the remote site and then use replication technology to copy data from one environment to another.

Another side to spare parts is the need to add newer parts to older servers. WDPI picks up old machines and upgrades their memory, processor, disks, and other parts. This makes the equipment more attractive and adds to its shelf life. It can also be a good way to pick up a decent server configuration at a lower price. A one year old HP ProLiant Server will still be pricey, but a three-year old model with upgraded components will be inexpensive — and, in some cases, almost as good.

"Generally speaking, the more recent a used server, the smaller the discount," says Lilia Petrova, a sales rep at used equipment vendor Technorex, which is based in Toronto. "We offer refurbished goods from the likes of Sun, HP, Dell, and IBM at 25 percent to 85 percent off the list price, depending on age, condition, and features.

Times of Uncertainty

There are many reasons to go with refurbished servers, with cost being at the top of the list. "The big reason people buy from us is the savings," says Foley.

Other rationales may also apply. WDPI's Caswell argues that hardware is not becoming obsolete as quickly as it did in the past. Further, not all server and storage applications require the latest in technology.

"Buy the technology that is required by your application," he says. "That will highlight areas where midlife refurbished technologies can be utilized."

He also suggests getting a second-hand quote even in situations where you fully intend to buy new. Such quotes may or may not indicate substantial savings. But at the very least, they may provide leverage when negotiating with OEM vendors.

In times of uncertainty, refurbished may be the sound choice (e.g., when the life of a specific application is in question, upgrades are looming, or server lines are rumored for retirement).

One final word of caution, however. If you have agreements with VARs or OEMs, suddenly introducing second-hand servers into the data center may be a prescription for trouble.

"Also, if you have you already have agreements in place with specific distributors, buying second hand could jeopardize discount deals," says Longbottom.

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