Businesses get new marketplace for used IT gear
The buying and selling of used IT equipment is not a trivial market, but it doesn't get enormous attention. In many cases, enterprises unload used equipment as a trade-in or at bargain price to a wholesaler because they just want the equipment off the floor.
A new Chicago-based startup says it has developed a system to help enterprises get as much value out of their old IT equipment as possible.
The company, MarkITx, is running an online system for selling equipment, but it's not a new version of an eBay-like system. The seller and buyer remain invisible to each other, the money goes in escrow, and the transaction may even involve third-party vendors to refurbish equipment.
Ben Blair, the CTO of MarkITx, said the exchange works like "a two-sided market" rather than an auction. Buyers post what price they want to pay for particular piece of equipment, including condition and quantity. Sellers post the quantity and current condition of the equipment they are selling and what amount they want to receive for it.
Blair provided this example: A telecom operator wants to sell a few cabinets of Cisco Unified Computing System (UCS) systems for $2.1 million, and a financial exchange operator is seeking a UCS for their back office.
MarkITx puts a value on the equipment, and in this case it recommends selling the Cisco equipment at $1 million, based on a range of $800,000 to $1.2 million. The telco lists all their equipment at the suggested price, but each unit is listed as a separate item at its fair market value. If the buyer and seller agree on the price, the trade is executed automatically and the payment is put in escrow with MarkITx.
Once that happens, the telco is then given shipping instructions to an OEM- or ISO-certified refurbisher that MarkITx is working with. That third party inspects the equipment, test and verifies it, and the equipment is delivered to the buyer. When the buyer accepts the equipment, the funds in escrow are released.
MarkITx will also bring the equipment up to the condition that buyer wants. For example, a seller is offering 10 rack-mount LCD KVMs at $200 each but in "C" condition. However, the buyer wants them in "A" condition, with replaced back panels and polished glass. The refurbisher says it will cost $100 per unit to bring the equipment to "A" condition, and if the buyer is willing to pay $300 per unit, the trade executes.
Blair said the company, which began operating last May but just launched publicly this month, is clearing about $1 million in transactions a month. It has $5.5 million in supply on the market, and $13.5 million in demand, he said. The bulk of its customers are in telecom, data center, education and government. The company is paid by the seller through a default commission of 20 percent, but it has membership plans for lower commissions.
Blair believes there is an opportunity for the company because he says many enterprises are only interested in getting rid of their equipment, not in maximizing its potential resale value. They believe that once IT departments investigate the potential resale of some of the equipment through their market, their minds will change.
"[Wholesalers] make their spread off ignorance," said Blair, who said his company's model ensures offering transparency on price.
According to IDC, the market for used equipment in the U.S. is about $70 billion.
Joseph Pucciarelli, an analyst at IDC, said that a lot of companies are restrained on what they can spend on capital equipment, and purchase used equipment to augment their existing systems. In many cases, they buy used equipment to keep compatibility with existing systems as way to keep their "support footprint" from expanding, he said.
Pucciarelli said companies typicall will unload used equipment to an original equipment manaufacturer (OEM) as part of a trade-in on an upgrade.
The company doing the upgrade won't get top dollar for their old IT equipment, but they may not see a selling alternative as worth their time, said Pucciarelli. Relative to the overall size of the transaction in an equipment upgrade, "you are talking about something that is pennies on the dollar [for the used systems,]" he said.