Taking The Pulse Of The Used Server And Storage Market
February 3, 2021 Timothy Prickett Morgan
Those of us who buy certified pre-owned vehicles know a secret that some of our peers in the datacenter also know about buying certified pre-owned servers and storage: You can get a lot better bang for the buck by staying one generation behind, and not really sacrifice much in the way of performance and features.
And in the case of IT, unlike the situations with families buying vehicles, some customers have to stay two generations or more behind because of the limitations of their application software. And so they absolutely need to stay back on vintage iron. Even then, there is no necessity to take a risk to buy such vintage equipment from a used equipment dealer, basically as-is out of the back of a truck. (What is commonly referred to as the “gray market” by many people, or the secondhand market by others.) In a lot of cases, the server and storage OEMs will certify even this older gear and also provide hardware and software maintenance on it as well as financing for it, making it, in many technical respects, as good as new – but for a lot less money. This is certainly the case with IBM Global Asset Recovery Services, the division of IBM Global Financing that handles certified pre-owned equipment for the company.
To try to get a handle on the state of the used and certified pre-owned equipment markets, the market researchers at IDC did a study of companies who buy such gear, including servers and storage. The survey was designed to get an answer to a few basic questions:
- What are the selection criteria for those who are buying used and certified pre-owned equipment?
- To what purposes is this equipment put to? How do organizations use this equipment?
- What criteria do customers use when thinking about vendors and partners who deliver such equipment?
- What expectations do customers have with regards to maintenance and support services?
- And finally, what is the value of buying used or certified pre-owned versus buying new?
In a recent webinar presentation going over the results of the survey (which you can view at this link), Susan Middleton, research director of flexible consumption and financing strategies for IT infrastructure at IDC, said the study was published August of last year, which means it is capturing at least some of the sentiment in the IT space after the coronavirus pandemic hit and the governments of the world started locking down and parts of the economies soared while others collapsed.
In total, 525 decision makers were surveyed in seven representative countries with a fairly balanced count in each country: Australia (75), Brazil (50), Germany (75), Japan (75), India (75), the United Kingdom (75), and the United States (100). To participate in the survey, respondents had to have acquired used or certified pre-owned equipment in the prior 18 months and they had to be an influencer in IT equipment buying decisions and knowledgeable about why their companies do so. The survey also wanted to get a cross-section of company sizes and industry verticals. Here is the breakdown in an infographic, which shows this was a very balanced set of survey participants indeed:
Source: IDC US46777920: IDC’s Review of Used IT Equipment Trends: Understanding IT Buyers’ Selection Criteria (August 2020)
Among the many things that this survey and the accompanying webinar discussed is the fact that there is a misconception that companies buy used or certified pre-owned equipment to avoid paying hardware or software maintenance. This is just not born out by experience, and in fact, one could argue that because companies are getting much better bang for the buck on their servers and storage, they are more inclined to buy hardware and software support services because they have savings they can apply to this. Such IT shops certainly could make that argument without having to go all the way and buying lots of spare parts, warehousing them, and self-supporting. Some companies do this, but it is not without risk, of course.
Without even taking the COVID-19 outbreak into account, it looks like demand for used and certified pre-owned equipment was already on the rise in 2020, according to the IDC survey data.
IDC US46777920: IDC’s Review of Used IT Equipment Trends: Understanding IT Buyers’ Selection Criteria (August 2020)
An amazing 58 percent of those companies polled said that they would be increasing their spending on used and certified pre-owned gear, and another 28 percent said it would remain at the same level. Now, remember, to take this poll companies had to have bought secondhand or certified pre-owned gear within the past 18 months, and of the 525 respondents last June, only 13 percent said they would decrease their spending levels on such equipment.
When asked a little more detail of the effects from the COVID-19 outbreak, three quarters of those polled said their spending levels on non-new equipment would increase or remain the same, but a slightly larger portion said they would decrease such spending and 9 percent said they just didn’t know yet. The reality of the situation is probably something akin to the average of the two pie charts above – when you ask a simple question, you are always stripping out a lot of context and get simplified answers.
What is true of the situation when it comes to servers and storage, which is what we care mostly about here at IT Jungle, there is often, within that 18 month window, an opportunity to buy used or certified pre-owned gear that is of the current release (what is called N in the business), but there is never enough supply of such equipment to meet demand. And with so many digital transformation projects being accelerated last year and supply chains and manufacturing operations sometimes messed up, even the supply of new equipment (that’s also N, and a slightly different flavor of it) was sometimes not able to meet demand, according to Middleton. And so customers can go back one generation, the so-called N-1 release of hardware, and often get equipment for a 40 percent to 50 percent discount off list price. And for those who need N-2 or even N-3 gear, organizations like IBM Global Asset Recovery Services can handle these as well (which would mean Power7+ and Power7 equipment, if you are talking Power Systems). These machines run subsets of applications, but are not always running core, mission critical applications (excepting those with older application releases who are, for various reasons, stuck there.) The N-3 machines, according to John Richards, vice president of Global Asset Recovery Services, who participated in the webinar on January 28, are often used for disaster recovery backup machines and, we suspect, are also used as development and test machines sometimes, too.
“This is a common phenomenon, and it just makes total sense,” explained Richards. “These customers are looking for value, and the study talks about that the vast majority of this gear is going into production, at whatever level. They view the workloads that are going to run on them as very important.”
Some 51 percent of those companies surveyed by IDC said that they were deploying used and certified pre-owned equipment in production environments, with another 14 percent using this machinery to support disaster recovery operations, 13 percent using it for test and development, 13 percent using it as spares, and 6 percent using it at edge locations. The panelists on the webinar agreed that during the coronavirus pandemic, there is an increasing focus on equipment reliability and disaster recovery resources, which makes sense given that so many IT workers are still working remotely, as are employees in other jobs at many companies.
In addition to Middleton and Richards, the webinar going over the results of the IDC used equipment study included commentary from Craig Aston, chief operations officer at Celerity, a reseller and managed services provider in the United Kingdom; Tom Bates, president of ChannelWorks, a provider of remarketed equipment; and Loke Uei Tan, director of product management at cloud service provider Skytap, which as it turns out not only resells instances of Power9 servers on its public cloud, but also has been buying up Power7 and Power8 gear to help customers with vintage applications move to the cloud.
To find out a whole lot more about the state of the used and certified pre-owned server and storage market, go to this link and watch the replay of the webinar and check out the IBM Marketplace to see the value you can get from Certified Pre-Owned equipment.
This content is sponsored by IBM.
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