Secondhand storage is cheaper but also riskier

At ATA Airlines, the practice of buying refurbished storage systems started small, with the purchase of a workgroup-size disk array. Over the past six years, the US$1.2 billion airline bought more and more used storage equipment, including enterprise-size storage systems, tape libraries and eventually Fibre Channel storage-area networks. Today, "there really isn't a case where we wouldn't consider previously owned storage systems," says Paul Smith, director of information services at Indianapolis-based ATA.

The result: savings that add up to at least 50% off list price for used storage components and 60% to 70% savings for used storage systems.

"Why pay top dollar when you can let someone else take the hit on new equipment?" says Chuck Copell, manager of hardware support services at Affiliated Computer Services, a US$4 billion outsourcer in Dallas. "Storage hardware depreciates as fast or faster than an automobile. Whenever possible, I like to buy used equipment."

The hottest used items include tape and optical libraries, as well as other archive and backup products, where performance is less critical and the obsolescence cycle is slower, according to resellers. But the market for newer equipment, such as Fibre Channel SAN switches, is also active, and midrange disk arrays, such as IBM Shark's and Hitachi Data Systems' Thunder system, also sell well.

The benefits go beyond cost savings to include faster acquisition cycles and more-flexible maintenance programs. But there are risks involved. Before doing business with storage remarketers, users should consider the answers to these common questions about secondhand storage equipment.

1. Is It Reliable? This is perhaps the first question asked by people who have never purchased secondhand storage. But experienced users have no reservations about reliability, as long as they're purchasing from a reputable vendor that sets up, tests and refurbishes the systems. The vendor should also offer a warranty that the equipment is in working condition upon arrival at the customer site and possibly even for 30 days until the system comes under a service contract with the manufacturer or a third-party provider. Some resellers will also offer longer warranties on certain equipment for a higher price.

In any case, "you have to be comfortable with the vendor you choose," says Smith. "It could make all the difference if the system has been in a climate-controlled environment as opposed to a hothouse where the disks have been spinning in 100-degree heat."

2. Can I Get a Service Agreement? It's important to determine beforehand if the equipment you're buying is eligible for maintenance from the original manufacturer or from a reputable third party. "Some of the big vendors like HP, IBM and Sun are very strict about what they will and won't support as far as the age of the equipment and the firmware and its interaction with their more modern equipment," Copell warns.

Vendors may also provide maintenance contracts more readily if you buy from an authorized reseller of their equipment. Otherwise, they may require a site visit and an audit to perform necessary upgrades or firmware changes - for a price, of course.

You should also ensure that all the drives within a storage system are original manufacturer drives, or the manufacturer won't place them under maintenance agreements, according to Robert Davie, founder of ITParade.com, a Web-based marketplace for refurbished computer equipment. For example, a Sun Microsystems array must have all Sun-manufactured drives in it.

IBM is one of the only vendors with well-defined processes for servicing the secondhand market, says James Davie, a vice president at Canvas Systems, US-based reseller. It offers a "banding process," by which IBM certifies that the system is "maintenance service qualified" at the time of the sale. The system arrives at the customer site with a silver band around it, IBM engineers implement the system, and IBM provides the maintenance contract. This comes at an additional cost of about US$1,000, according to Doug Rengel, a consultant at Xerxes Computer, a refurbished computer reseller, so customers might choose this option only for higher-end equipment.

Some companies, such as ATA Airlines, don't rely on vendors for service and instead maintain their equipment themselves. ATA even keeps its own inventory of spare parts. "We're an extreme case," Smith acknowledges.

Bruce Caswell, vice president of marketing at World Data Products, a refurbished computer reseller in Minnetonka, Minn., says roughly 80% of his company's customers put their hardware on a maintenance contract, while 20% are self-maintainers. Of those that opt for maintenance contracts, most turn to credible third-party providers such as Northrop Grumman, DecisionOne, Storage Technology and General Electric to lower their cost of maintenance.

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