It is a similar if less chaotic story in the enterprise sector where a number of companies have built up $100m-revenue businesses in buying up used computer equipment from corporate clients, refurbishing it, and selling or leasing it out to someone else either another enterprise, or an IT services company involved in an infrastructure management deal.
Used equipment resellers such as Canvas Systems, Atlantix Global Systems, and World Data Products shift millions of dollars worth of server kit from the likes of IBM, Sun Microsystems and Hewlett-Packard through their logistics centers. These companies are expanding their global reach as well as their services portfolios as clients warm to the potential cost savings they can deliver.
Atlanta, Georgia-based Canvas Systems announced a sixth consecutive year of profitability and growth in revenue in 2004 with sales reaching $120m. The company has a $20m inventory of server, storage, and networking equipment from the likes of IBM, HP, Sun, and Cisco. Canvas claims it can save clients between 70%, to 80% over the price of new equipment, which it offers with a three-year warranty.
Atlantix Global Systems, also based in Atlanta, now makes 30% of its $130m annual revenue from international clients. The company carries $15m in inventory and operates a refurbishing and technical support center.
World Data Products, which made $67m in sales last year, recently announced it was expanding the services capabilities of its European operation. Will Richardson, European sales manager, told Global Computing Services: We don’t just buy the kit and put in on a shelf in our warehouse. We audit it, and disassemble it into its constituent parts such as the processors, memory, and storage devices. We then tag it, and re-configure it according to the client’s requirement.
Richardson said: The brokerage market is very fragmented, and is dominated by companies with a handful of people specializing in one particular platform. There is a guy in Texas who makes a living just selling refurbished rack rails for servers. He added that second-hand computer equipment has also become one of the fastest-growing areas on online auction site eBay.
Most of the hardware vendors themselves sell refurbished kit, but Angela Wilkinson, sales director at Canvas Systems’ European operation, Solis, said they are not as agile as the professional brokers. She said: IBM is one of the better ones for selling refurbished kit, but it is not doing it in the market on a daily basis and is not aware of market prices. We are cheaper than them nine times out of 10 for refurbished equipment.
All three companies argue that while vendors promote upgrades every three years, the true life of most hardware is closer to five years. World Data Products claims that by buying refurbished kit, clients can save 60% on their initial hardware investment, and up to 40% on maintenance costs over a support contract with the hardware manufacturer.
Richardson at WDP believes his company can fill in the gaps in support capabilities at the maintenance operations of hardware vendors and larger services companies, when a manufacture ceases to support certain products, or where the services operation of an IBM or HP is required to maintain a multi-vendor server environment.
He said WDP has a relationship to provide third-level support such as product repairs as spares supply, to StorageTek in the US itself a preferred supplier of support services to IBM. Richardson said: IBM only wants to support IBM kit, but we couldn’t replace the vendors; we need them as much as they need us. Maintenance is a competitive market, but our ability to provide spares as part of our support contracts gives us an edge.
Canvas Systems also identifies third-party maintenance as a big opportunity, stating that it too does a lot of work as a sub-contractor to larger services organizations that lack the capability to support older kit or multi-vendor environments. Wilkinson said: End users want the support for all their equipment be it HP, Dell, or IBM, under a single umbrella.
