Secondhand Savings

Computerworld - At ATA Airlines Inc., the practice of buying refurbished storage systems started small, with the purchase of a workgroup-size disk array. Over the past six years, the $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 Inc., a $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 Corp.'s 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 Inc., a Web-based marketplace for refurbished computer equipment in Cary, N.C. 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, a reseller in Norcross, Ga. 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 $1,000, according to Doug Rengel, a consultant at Xerxes Computer Corp., a refurbished computer reseller in Bloomington, Minn., 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 Corp., DecisionOne, Storage Technology Corp. and General Electric Co. to lower their cost of maintenance.
3. Should I Expect Vendor Push-back? Particularly if you're purchasing a high-end system, many vendors will try to dissuade you from purchasing refurbished equipment by threatening exorbitant "recertification" fees or even refusing to service it. "I know one large insurance company that got strong push-back from Sun at the CFO level and decided not to purchase refurbished because of that," says Robert Davie. On a StorageTek L700 tape drive, the relicensing fee can reach $2,200, he says.
According to many observers, the vendor with one of the worst reputations in this regard is EMC Corp. "EMC has a subtle way of controlling the market in its own used gear," says John Webster, founder of the Data Mobility Group LLC, a consultancy in Nashua, N.H. "They say that the microcode to run the machine is not transferable and that you need to buy a new microcode license -- which, by the way, ain't cheap."
EMC defends its relicensing requirements. "Our systems are intelligent storage systems that have software incorporated into them, and it is standard practice throughout the industry that the software license doesn't get transferred when the hardware gets transferred," an EMC spokesman says. "The licensing also ensures that the product operates as it's supposed to for the customer."
It's important to keep in mind that these types of fees are negotiable, resellers say, and that salespeople can reduce or even waive them. A good negotiating point is to suggest that you might opt for third-party maintenance, meaning the vendor will lose the service revenue as well. Robert Davie recommends contacting the field service rep instead of the salesperson, since the service rep is typically compensated on the service contract revenue and is more likely to negotiate with customers to reduce relicensing fees.
Smith advocates having a frank discussion with your vendor about servicing issues. With his company's storage vendor, Hewlett-Packard Co., "it took some time," he says. "There were lightly intimated threats of refusal to put it under warranty and tack on recertification costs." How the vendor reacts, Smith says, can either cement the relationship or end it.
4. Will There Be Compatibility Issues? One gotcha on used storage equipment is compatibility with newer equipment, particularly in the areas of firmware revisions and interface compatibility. "If you have the luxury of time, it's easy enough to take a look at your operating systems and firmware revisions and patch-level kits and determine whether the equipment will be an easy fit," Affiliated Computer Services' Copell says. "But around here, things are on a deadline mentality, and that's when you find problems."

In some cases, resellers load the latest firmware revisions onto the equipment they sell; in others, their tech support staffs can help with fixes when problems are discovered.
At ATA Airlines, Smith's staff conducts its own research into firmware requirements. "We need to be prepared to understand why you can have two disks that carry the same part number, and one works while the other doesn't," he says.
Also keep in mind that standards change. "You can mistakenly assume that a piece of old gear can do something that's commonplace today," says Marc Farley, president of Building Storage Inc., a consultancy in Saratoga, Calif. For instance, an older Fibre Channel host bus adapter might be available for $20, but it's useless if it doesn't support a fabric log-in, which most SANs use today.
5. Can I Trust the Remarketer's Staff? The caliber of vendors in the refurbished market can vary widely, Smith says, and the best way to know what you're getting is to check the resumes of the technical staffers.
"We've relied on [World Data Products] heavily to ensure things work when they got here and do some integration," he says. "In essence, the remarketer's staff is an extension of your staff, so I'd advocate looking carefully at the vendor's hiring practices and the quality of their employees."
In a long-term relationship, a remarketer can help you decide what will work best with your environment and what options will save you the most money. "There are tons of prerequisites for purchasing storage -- what are you attaching to, what storage adapters are you using, what SAN devices are you using," says James Davie.
"Sometimes, the people selling in the used market have no idea what they're promoting," Farley says. For instance, when he has purchased on eBay, he's been given data sheets that don't match the product being sold. "Clearly, they had no idea what they were doing, but they were sure eager to sell it," Farley says.
Brandel is a Computerworld contributing writer in Grand Rapids, Mich. Contact her at mary.brandel@comcast.net.