Reuse + Recycle = Revenue

Telecom service providers of all sizes and shapes have no tolerance for equipment outages, network downtime, or any business disruptions that impact their ability to meet stringent Service Level Agreements (SLAs). As a result, many ILECs, CLECs, and IOCs have developed and implemented strategic plans to avoid single points of failure in their procurement procedures in order to ensure their customers always receive the “five nines” level of service they are accustomed to.

That said, some of those same service providers would say that the combination of maximizing uptime, green systems, and saving money don’t always go together.

The savvy providers, however, know that the secondary networking equipment market is gaining traction. In fact, it resonates with organizations seeking a combination of savings, environmental friendliness, six-sigma quality levels, and fast delivery of networking equipment. This news comes at an opportune time because recent product shortages from original equipment manufacturers are putting networks at risk and the economy has created the need for lower cost options. Market leader Cisco, in particular, has been experiencing well-publicized delivery delays of more than 11 weeks due to certain component shortages. Organizations often encounter even lengthier lags when it comes to replacement of previous-generation gear, since most OEMs do not keep inventory of older products. Therefore, opting for a greener approach with equipment that already is proven and available avoids the uncertainty of OEMs’ realities.

Clearly, it pays to have a backup plan for equipment procurement, which is why the secondary networking equipment market is gaining traction with organizations seeking rapid deliveries and big savings on the latest as well as previous-generation gear. Pre-owned equipment typically offers savings of up to 90 percent off OEM list prices. Aside from the immediate appeal of savings, this distribution channel also maintains ample inventory levels of high-quality, current- or past-generation gear -- much of it unused or in original boxes -- that is available for overnight delivery.

The secondary market also can help its customers offset their capital expenditures by enabling the sale of decommissioned equipment. Remarketing lets companies promote the use of working equipment as well as recoup the maximum value for the surplus goods. As a result, increasing numbers of telcos are finding that the secondary market makes “green” sense -- both financially and environmentally.

Secondary Network Market Gains Traction With Telcos
According to market watchers Ptak, Noel & Associates, companies can realize amortization savings of up to 40 percent by extending the lifecycle of networking equipment by 2 years. In many cases, leaders in the secondary market keep popular gear in circulation for up to a decade, which provides telcos with flexible options for supporting network expansions, sparing strategies, testing labs, and emergency equipment replacement.

The multi-billion dollar market for pre-owned networking gear has been around for more than 2 decades and remains the primary avenue for refurbished, recycled network gear. Recently, the current economic climate has created a surge in interest as companies increasingly leverage this channel to buy and/or sell gear. This alternative procurement channel also is beginning to play a bigger role in the burgeoning “Green IT” movement as more organizations incorporate eco-friendly business practices, including reusing, refurbishing, and recycling network equipment. Virtually any network element can be found on the secondary market, which is a major reason telcos consider this channel an excellent alternative source for procurement.

Before you jump into working with a company that specializes in the secondary market, do your homework. Look for a provider of pre-owned gear that thoroughly tests all its products before offering them for sale. Tested pre-owned equipment has an edge over new equipment that has never powered up, and that added assurance offers outstanding peace of mind for customers.

Aside from the sheer cost efficiencies of this back-up plan, there are other equally important reasons to move beyond a single source of equipment procurement. Just a few include:
• The cost of one-for-one equipment replacement from primary suppliers can be budget-busting.
• If there's a regional or widespread disaster, what assurances are there that the primary supplier will provide preferential treatment when so many others also will be affected? Horror stories abound about non-responsive, short-stocked OEMs in non-crisis times, so who's willing to bet the scenario will improve in an emergency?
• OEMs typically keep on hand only a small percentage of their current product lines, and most of that is earmarked for existing maintenance contracts.
• The reality for most service providers that are paying the high cost of an OEM's "next day" replacement guarantee is that it's unlikely the needed gear will be in place before 72 hours anyway. Because even if the requested items are in stock, they still need to be delivered, unboxed, configured, and installed.

Fueling Expansions and Maximizing Uptime
While alleviating the single point of failure in equipment procurement strategies improves the possibilities of keeping networks in prime condition, service providers also are finding that the secondary market can ease both planned and abrupt network upgrades and expansions. For one of the nation's largest independent providers of next-generation and traditional communications products and services, the secondary market offered the most economical method to accommodate sudden, rapid network expansion.

Since the sharpness of this telco's competitive edge came from being able to respond swiftly to all kinds of market situations and opportunities, its desire to purchase additional Cisco and Juniper equipment often came with immediacy, which created fulfillment problems with the OEMs. Faced with persistent delivery delays, the telco tapped the secondary market for like-new gear that was fully configured, tested, assembled, and shipped overnight -- ready for immediate cutover into the production network.

Today, leading secondary equipment providers offer a variety of procurement options to help telcos fuel network expansions as well as sustain maximum uptime, including:

One-for-one sparing or replacement: Pre-owned equipment is available for virtually every network element. With savings of up to 90 percent off manufacturers' list prices, an increasing number of companies are finding the secondary market makes it possible to have a fully redundant network.

One-for-many sparing: A more cost-effective sparing strategy involves acquiring a spare for every 3 to 5 identical network elements. This delivers upgraded protection within budgetary constraints.

Off-site spares depots: Companies with multiple locations face several challenges. Perhaps there is no place to store spares or indecision about the best place to serve all locations. Keeping spares at an alternate source's warehouse means they are available for shipment to wherever needed.

A temporary fix: Refurbished gear provides an excellent fill-in while waiting on replacement from primary suppliers.

Testing and training: Many companies that utilize the interim solution then re-deploy pre-owned equipment for network testing or personnel training.

Asset Recovery = New Revenue Streams for Telcos
Telcos typically have a surplus of outdated or decommissioned equipment as a result of keeping pace with technological advancements, as well as supporting expansions, mergers, acquisitions, or downsizing. Traditionally, this gear has been overlooked and underappreciated, even though much of it still has value. Fortunately, the secondary market provides telcos with a channel for selling this equipment while also yielding new revenue streams to support network upgrades and other strategic corporate initiatives.

To assist in recouping the maximum value for surplus goods, leading providers of pre-owned networking equipment offer asset recovery programs. Such operations help extend the useful life of networking equipment while giving telcos a way to recoup value in surplus routing, switching and IP telephony technology. The secondary market provides a fast, efficient approach for recovering investments in surplus technology along with a variety of support services to streamline the entire asset recovery process. Equipment trade-in and consignment programs as well as "like value" asset exchanges typically are available. By buying, refurbishing, and reselling equipment, telcos can reduce e-waste while keeping viable equipment out of our landfills.

Comprehensive asset recovery programs feature specialists with a high level of expertise who expedite the entire process, providing experience in assessing inventory value and condition as well as making sure all bases are covered when uninstalling, packing and shipping equipment. Most top liquidators can provide a highly responsive and thorough on-site inspection and evaluation, resulting in a quote -- in writing -- in no more than 24 hours.

4 Steps to Greener Pastures
Most organizations can make their operations greener by creating company-wide initiatives to improve environmental responsibility. Four steps are all it takes:

Step 1. Develop an IT asset management strategy. By planning ahead for future end-of-life products being removed from the network, telcos can proactively and properly remarket and recycle equipment. The funds from this action can be put into the IT budget or refocused for other corporate initiatives.

Step 2. Become a champion for amending all procurement practices to include refurbished options for networking equipment, especially when cost, immediate delivery or a need for previous generation equipment is a factor.

Step 3. Every year it seems that OEMs are trying to condense their product lifecycles, forcing customers into accelerated, and most likely unnecessary, upgrades. Fight back by avoiding upgrades forced by manufacturers' product end-of-life (EOL) announcements. Upgrade on your schedule, not the OEM's.

Step 4. Consider leasing equipment. The secondary market offers many options here that both minimize initial investment and ensure end-of-life asset management.

While OEMs often refer to the secondary channel for network equipment as the "gray market," many telcos would prefer to think of it as the new green, especially since buying from, and selling to, this channel makes sound fiscal and environmental sense.

Taking advantage of all there is to offer in the secondary market will provide ILECs, CLECs, and IOCs with recurring benefits in time and budget savings as well as network performance. With inventory levels at an all-time high, there has never been a better time to bolster a sustainable green IT strategy by exploring alternative procurement options from the thriving secondary market.

KEY FACTS ABOUT THE SECONDAY MARKET
Current-generation equipment is available.
Leaders in the secondary market maintain an inventory of the most popular items for immediate delivery. In contrast, OEMs often takes weeks or months to deliver new equipment.

Used equipment is not abused equipment.
Reputable marketers of pre-owned equipment do not sell goods "as is." All offerings are tested and refurbished to ensure they meet manufacturers' performance specifications.

Third-party components are not necessarily inferior.
Third-party components are often the same as those received from a network equipment manufacturer. For example, Cisco buys its memory from NEC, Samsung, and other third parties rather than manufacture those products. Purchasing accessories such as memory directly from a third party may reduce costs as much as 80 percent.

Product warranties and support are available.
Choosing pre-owned doesn't mean sacrificing support. Leading sources of pre-owned equipment include a one-year overnight replacement warranty, which exceeds many manufacturer warranties.

 About the Author
Mike Sheldon is president and CEO of Network Hardware Resale. He has more than 15 years of experience in the banking industry and communications networking. The Santa Barbara, Calif.-based company is the world’s largest provider of pre-owned and refurbished networking equipment. For more information, email info@networkhardware.com or visit www.networkhardware.com.

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