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The Grey Market of IT Hardware

Many times we have customers approach us and say, “I can get that part you quoted from Amazon at a better price”. We see these responses frequently after our customer’s check Amazon, NewEgg, TigerDirect, etc. for better pricing but often we find this tact leads to a higher overall cost. Here is what you should know about the Grey IT market and off-brand or used IT hardware. (Grey Market, or parallel market, is a market where a product is bought and sold outside of the manufacturer’s authorized trading channels.)

 

grey market example
grey market example | source: http://www.canonpricewatch.com/blog/authorized-unauthorized-%20dealers-and-grey-market-explained/

 

Here’s Why You Might Want to Reconsider that “Amazing Deal”

One of our engineers, while working with a customer, ran into a scenario where the solution was a new Cisco router. The router in question was not cheap! The customer was provided a quote and they were able to locate the exact same Cisco router from a web reseller (like Amazon, NewEgg, TigerDirect, etc.) for a fraction of the price. Seems like a reasonable deal, right? The customer ended up purchasing the equipment and it was indeed the Cisco product that they needed.

 

After the new gear arrived – our engineer went on-site to install and configure the device. During the configuration, there was a small problem with the firmware that required it to be upgraded to the latest version. Cisco requires that their equipment be registered before they provide the files to perform this upgrade. The customer then contacted Cisco to register the product and download the latest firmware. Yet, Cisco was not able to locate the serial number of the product. When Cisco dug into the details, they noted that the equipment in question was ,”Grey Market”. Therefore, they refused to put the device under a smartnet support plan or register the equipment.

 

When asked why, Cisco responded stating that the hardware was, “Grey Market”.

 

What is Grey Market

Naturally, the customer questioned, “What is Grey Market?”. The Cisco customer service representative explained that the gear the customer ordered was destined for the Asia/Pacific market but never made it there. Cisco cited this as the reason they could not register the product. Though Cisco never stated that the product was stolen, we assumed the product must have fallen off a truck somewhere in Asia where it made it’s way to North America, and eventually sold to the customer.

 

The End Result

The customer ended up having to purchase the originally quoted product at the original quoted price. This device was then installed and configured properly and the issue was resolved though the time to implement and the costs were certainly more than was anticipated.

 

PennyWise, Pound-Foolish

It is also worth noting that most of these Internet resellers specifically sell consumer based products which vastly differ from commercial based products. As well, these vendors are known for selling used or refurbished equipment which might explain the greatly reduced price. Our experience tells us that purchasing business IT equipment from these providers will lead to increased business costs. Yes – it’s true that you might save a few hundred dollars (and I get it, that’s a good sum of money and does add up) but you will end up losing any cost savings the moment something unexpected happens. It’s like driving 10 miles to a different store because you can save 10 cents but then get into an accident along the way. You may have saved 10 cents but spent $5 in gas getting to the other store and you now have the added aggravation of dealing with the accident.

 

Off-brand System Components

The last item I want to discuss is buying off-brand internal computer components to save some money. Again – this is pennywise and pound-foolish. Yes, Hewlett Packard and other primary technology vendors can be greater cost than a white-box or off-brand solution. Though it is important to note that these vendors command that higher cost due to the features and capabilities of their systems, which in many cases reduces overall costs and pain in the future. For example, all memory (RAM) is not created equal. If a customer were to choose to purchase a lower cost memory chip and install in an Hewlett- Packard server, this memory may function but it is not the same as the Hewlett-Packard memory. For Example, the machine may boot and it may work but if erratic behavior begins to develop it will be extremely difficult to troubleshoot it. The HP memory, on the other hand, is “smart” and makes diagnosing problems much easier. HP memory has been designed to work with the other components of the system, such as the mainboard for reporting and monitoring. Thus intelligence has been built into the system. The mainboard will actually “monitor” the memory chip and report to the system any errors and even take the memory offline if it determines that this memory chip is failing to perform. This level of detail and reporting allows for quick and decisive troubleshooting. In turn, this translates to a faster repair and lower labor costs to get your system back online.

 

Further, many people don’t know that the system manufacturer (HPE, Dell, Lenovo, etc.) will not warranty or troubleshoot the equipment in the event of a failure. They would simply first ask that any non-HP parts be removed or replaced. Additionally, if you send in a system that doesn’t have manufacturer approved parts – they will back charge you for the shipping, labor, and any other costs incurred during their attempted repair. This may also cause an increase in other costs such as vendor labor productivity loses, IT vendor costs, the cost of lost revenue, and perhaps even the potential loss of your business reputation due to the incident.

 

Long story short: It can be very expensive to save 50 bucks…

 

 

Related:

https://systechinfo.com/news/wire-transfer-fraud-an-introspective

https://systechinfo.com/news/section-179-a-tax-write-off-every-business-needs-to-know-about

https://systechinfo.com/news/what-are-managed-services

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