Good as new

US secondary equipment specialist Digital Warehouse has set up operations in the Middle East and is targeting cash-strapped enterprises.

  • E-Mail
By  Simon Duddy Published  April 24, 2005

|~|JOEA_m.jpg|~|“An enterprise buying new network kit from a leading vendor should expect to get about 30-40% off list price. When that product is de-installed and appears in the secondary market, the product is generally re-sold for 50-70%, and sometimes 90%, off list price.” - Joe Asady, founder and CEO of Digital Warehouse.|~|Digital Warehouse is looking to build significant business by pushing secondary equipment at the enterprise market in the Middle East. The company buys second hand network kit from downsizing firms before refurbishing and selling it on. The company is in the process of setting up an office in Dubai and plans to reveal sales staff and tie-ups with service-orientated companies later in the year, as it seeks to add support and rental services to its offering. Digital Warehouse has already seen considerable business in the region and is looking to build on this with a more direct presence. “We’ve created a lot of customers and servicing them from the US is a problem,” says Joe Asady, founder and CEO of Digital Warehouse. “We wanted to have face-to-face meetings with customers so we opened in the region at the start of 2005. We’re also serving Australia, China and India from Dubai,” he adds. With increased tightening of IT budgets, more enterprises are looking to refurbished kit to provide a cut-price but effective answer. Asady values the growing global secondary equipment market at an astonishing US$5billion, only a fraction of which has been tapped. “If you put the existing players together, and we are one of the top three, you’ve got about US$500million already serviced,” says Asady. While these global estimates are difficult to verify, there is no doubt that the market is thriving. The telecoms bust of the late 1990s, which led to struggling companies jettisoning a lot of perfectly good equipment and the widespread slashing of networking spend, was the catalyst for much of this growth. Analysts also concur that the secondary market is becoming increasingly important. “The secondary market for Cisco products [by far the vendor most affected by secondary kit] remains very robust. Recent product enhancements, combined with a large installed base, seems to assure a strong future demand,” says William Roch, research director, for IDC’s leasing evaluation service programme. The benefits of refurbished kit are clear – price, price and price. If an enterprise is daunted by the high cost of cutting edge equipment, significant reductions are available on equipment that is perhaps only six months or one year old. “An enterprise buying new network kit from a leading vendor should expect to get about 30-40% off list price. When that product is de-installed and appears in the secondary market, the product is generally re-sold for 50-70%, and sometimes 90%, off list price,” explains Asady. Despite the attraction of low cost kit, customers often view secondary equipment with suspicion, citing doubts over reliability and quality. Many enterprises simply do not want to take a chance with their networks, particularly if mission critical services rest on its reliability. “As a bank, we cannot take the risk of deploying secondary equipment, as quality of service to our customer is the number one priority,” says Adel Al Zarouni, senior vice president of Information Technology at Abu Dhabi Islamic Bank. To be fair to companies like Digital Warehouse they do not claim to be in the business of selling cutting edge networks. Rather they see secondary kit as a way of allowing businesses to cheaply expand existing installations. The availability of second hand equipment could also positively affect growth in the small to medium sized business market, as these companies can have access to products and features they otherwise could never afford. “Many companies are faced with budget constraints and when delivering non-critical services, refurbished equipment is an option,” says Rabih Itani, network and security manager at the American University of Beirut. “On the other hand, the value of new equipment in terms of reliability, support, total cost of ownership and new features cannot be underestimated. These requirements are vital, especially for infrastructure services,” he adds. Aside from doubts over quality and reliability and fear of product obsolescence, support is the key inhibitor preventing enterprises buying secondary kit. Original equipment vendors will, in many cases, not support equipment that has been sold on. Cisco is one such company — when an enterprise buys Cisco kit on the secondary market, warranty and service agreements are automatically expired. “Refurbished Cisco equipment is a fact of life and not something we police,” says Ghazi Attalah, general manager of Cisco Middle East. “All we want is to make sure that customers understand the difference between buying new and buying refurbished. When you buy refurbished, you are taking a chance with your infrastructure,” he explains. Other companies are more flexible in their attitude to secondary equipment and will go out of their way to certify and support second hand kit. Obviously vendors would prefer to sell new equipment in all cases, but vendors also see companies purchasing their second hand kit as at least preserving their brand even if they do not receive any profits. “Foundry has a used equipment support programme in place,” says Farook Majeed, regional manager of Foundry Networks, Middle East and North Africa. “Foundry equipment purchased from an uncertified or second hand vendor may be re-certified, inspected and brought under Foundry technical support,” he adds. Juniper Networks provides a similar service. It will not automatically provide support for its second-hand equipment but will, for a fee, assess the equipment first before suggesting an appropriate support package. “By doing this, Juniper maintains the brand’s reputation for quality and reliability, which also helps our partners to sustain their local business opportunities,” says Mohamad Abdul-Malak, regional manager for Juniper Networks, Middle East. Third party refurbishing companies in turn also offer certification for products, although this is not verified by the original vendors. In a further bid to reassure potential customers, Digital Warehouse offers a one year warranty for the products it sells and says that if a box fails it will replace it. As long as networking equipment prices remain high, there will be a place for secondary equipment. Clearly that place is not at the centre of a cutting edge deployment but it might be an attractive option for enterprises looking to achieve growth in less mission critical segments, without breaking the bank.||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code