Refurbished IT to see uptake in APAC

Region still in early stage of sophistication for IT procurement, analyst says, noting Asia-Pacific enterprises will follow U.S. companies in adoption of second-hand equipment.
Written by Liau Yun Qing, Contributor

SINGAPORE--Enterprises in the Asia-Pacific region will follow in the footsteps of their U.S. counterparts to include refurbished equipment as a source of IT procurement, said a market observer.

Matt Healey, program director for software and services at IDC Asia-Pacific, said the region's refurbished IT equipment market is still relatively nascent, with Asia-Pacific companies at the early stages similar to what U.S. enterprises have previously gone through. He was speaking at a Thursday briefing organized by refurbished networking equipment vendor Network Hardware Resale.

Not many companies in the region are "very large", Healey said, noting that as a company grows bigger and expands globally, the level of sophistication in IT purchasing will go up as well.

The analyst expects regional enterprises that wish to expand into multinational corporations (MNCs) to lead in the adoption of second-hand networking equipment. This is because a company that wishes to be an MNC cannot run its network as efficiently without an alternative networking equipment source.

According to Healey, the traditional approach to networking equipment purchase is for a company to buy "boxes" from one vendor along with the extended warranty for the equipment and renew the support down the road. This is "myopic" as companies would need to buy the equipment, along with vendor support and upgrade the equipment as dictated by the vendors, he said.

He argued that not the entire network needs to be purchased from one single vendor. While the core parts such as security of the network require support from the original vendor, he noted that organizations can consider other alternatives for certain applications.

One such alternative is to purchase refurbished equipment, he said. He noted that companies in the United States are already doing so.

He added that based on observations of the market, adoption of refurbished equipment usually starts with "someone at the branch office"--far from upper management. The administrator might have been subject to an IT budget cut or an immediate need for new equipment.

Given the circumstances, the employee would then "side-step" company policy and purchase refurbished equipment to tide over, Healey explained. When he or she realizes that such equipment are a viable option to new infrastructure, word of mouth quickly spreads.

"People on the ground are more pragmatic and accepting of solutions that prevents them from being yelled at," he said.

Used equipment vendor pushes into APAC
Also present at the briefing was Mike Sheldon, president and CEO of NHR, who concurred that the used equipment market in the Asia-Pacific region is "a new business". The 25-year-old company sells predominantly refurbished equipment from Cisco Systems as well as products from other networking vendors.

He noted "authenticity" as a top concern for enterprises in the region but said manufacturers play a role in fanning such doubts.

Sheldon said the region will gradually accept refurbished equipment just as Germany, which had a "phobia of anything used", did. It took five years for companies in the European nation to understand the advantages of purchasing second-hand equipment, he shared.

Among the Asia-Pacific markets, Hong Kong has the least resistance to refurbished networking equipment while Japan tops the list, he added.

Jason Ogden, regional sales director at NHR Asia-Pacific, said the company wishes to grow its existing markets in the region, which include Singapore, Australia, New Zealand and Hong Kong. It also has plans to expand to new markets including the Philippines, Vietnam, Indonesia, Malaysia and Taiwan.

He also pointed out that NHR is not there to compete head on with or to replace networking vendors. Rather, it will serve as a lower-cost option for organizations to consider.

Sheldon also does not see Hewlett-Packard's aggressive push into dominant player Cisco's market by using cheaper price points and a trade-in option to lure the latter's customers, as competition for his company.

NHR, he noted, provides equipment from a variety of vendors as well as allow customers to trade in their equipment. He added that even if HP products become "wildly successful", a refurbished older model from the company would still be cheaper.

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