By Roland Piquepaille
In this article, Scott Berinato looks at the hardware market, and more specifically at the secondary market.Here is the Executive Summary -- thanks to CIO Magazine.
In the wake of the 1990s technology bubble, there is so much used hardware available -- and so much emphasis on cutting costs -- that secondary market hardware is now a mainstream business. And once buyers get used to wholesale prices, it's unlikely that they'll go back to buying retail. CIO's survey of 187 IT executives showed that 77 percent are purchasing secondary market equipment and 46 percent expect to increase their spending on used machines next year. The savings from buying used can amount to 25 percent of operational costs, as it did for Tenneco Automotive. Meanwhile, some hardware vendors are trying to make purchasing on the secondary market sound as unappetizing as possible, implying that the cheap equipment comes from the semi-illegal "gray market." They tell buyers it will cost thousands to recertify the boxes. And they threaten to withhold support. CIOs who call these bluffs will find that the sales reps will either start trying to sell support services or they'll cut the price of their new gear. Buyers also gain leverage from the emergence of third-party companies offering alternative maintenance contracts.
Scott examines in detail the roles of the different actors in this market: the buyers, the brokers, and the vendors (both those learning to live with the secondary market and those in denial).
Let's listen to one of the vendors who embraced this new market, Irv Rothman, CEO of HP Financial Services. "Look, 40 percent of our [division's] revenue is from the secondary market. That's a big number."
Finally, the author asks a simple question: Who sets the price?
Paradoxically, the complexity of the secondary market was spun out of the simplest notion: supply and demand. When demand ruled, so did vendors. They set prices; they determined the value, or lack thereof, of used gear. Now supply rules, and CIOs have a great opportunity to grab the power to define value.
HP's Rothman calls it the law of the jungle. John Lynch, CEO of Asset Recovery Center (ARC) calls it the American way.
Source: Scott Berinato, CIO Magazine, October 15, 2002 Issue
Famous quotes containing the words stuff, cheap, secondary, market and/or hardware:
“The Same, the Same: friend and foe are of one stuff; the ploughman, the plough, and the furrow, are of one stuff; and the stuff is such, and so much, that the variations of form are unimportant.”
—Ralph Waldo Emerson (1803–1882)
“Or seen the furrows shine but late upturned,
And where the fieldfare followed in the rear,
When all the fields around lay bound and hoar
Beneath a thick integument of snow.
So by God’s cheap economy made rich
To go upon my winter’s task again.”
—Henry David Thoreau (1817–1862)
“Cloud-clown, blue painter, sun as horn,
Hill-scholar, man that never is,
The bad-bespoken lacker,
Ancestor of Narcissus, prince
Of the secondary men. There are no rocks
And stones, only this imager.”
—Wallace Stevens (1879–1955)
“Talk of a divinity in man! Look at the teamster on the highway, wending to market by day or night; does any divinity stir within him? His highest duty to fodder and water his horses! What is his destiny to him compared with the shipping interests?”
—Henry David Thoreau (1817–1862)
“A friend of mine spoke of books that are dedicated like this: “To my wife, by whose helpful criticism ...” and so on. He said the dedication should really read: “To my wife. If it had not been for her continual criticism and persistent nagging doubt as to my ability, this book would have appeared in Harper’s instead of The Hardware Age.””
—Brenda Ueland (1891–1985)