NHR News

Jun 27, 2002

CIO Research Reports: Second-hand IT

CIO.com

Reprinted with permission from CIO.com.

CIO Research Reports: Second-Hand IT

In an effort to keep you informed on where your fellow executives stand on critical business issues, CIO.com has instituted a monthly survey. In June, we focused on second-hand or used IT equipment; here's what respondents had to say.

Executive Summary

A recent CIO.com survey found that the majority (77%) of companies surveyed buy second-hand or used IT equipment, including PCs, servers and networking hardware, and close to half of the respondents expect to increase their spending on used IT in the next 18 months.

While the biggest factor in choosing used technology over new was to lower capital expenses, close to one third (30%) of respondents said that the performance of new equipment doesn't justify the investment or additional cost. IT professionals surveyed feel that used IT equipment is ideal in instances where high-performance is not an issue or where the particular system or technology is not mission-critical. In addition to savings of 50% to 75% off of new equipment prices in some cases, survey respondents also mentioned compatibility with existing systems as a benefit of second-hand technology. If the IT staff is familiar with a particular server, for example, there’s a minimal learning curve to get that system up and running, and downtime for system modification and configuration is minimized.

When asked about their biggest concerns, survey respondents listed reliability and quality of used IT equipment. In cases where the company did not purchase used IT equipment, respondents listed lack of warranties and unfamiliarity with the used market as reasons for not buying used IT.

Key Findings

Used IT Purchases
More than three-quarters (77%) of survey respondents said that their organization purchased secondary market IT equipment. The majority (61%) of IT professionals surveyed said that less than 20% of their current IT equipment was purchased on the secondary market. Our survey defined secondary market IT equipment as equipment purchased where your organization is not the first owner of the equipment including used, refurbished, pre-owned and recertified.

Close to half (46%) of the respondents expect their spending on used IT equipment to increase in the next 18 months while 47% expect their spending to remain the same. Only 7% expect their organization’s used IT equipment spending to decrease in the coming 18 months. On average, IT executives surveyed expect their used IT spending to increase by 15%.

Key Decision Factors
Forty-one percent of respondents cited lower capital costs as the primary reason that their company purchases secondary market IT equipment. Close to one-third (30%) said that the performance of new equipment vs. secondary or used does not justify the increased investment. An additional 15% cited budget constraints as the primary factor for purchasing used IT equipment.

Biggest Concerns
When asked what their biggest concerns were regarding the purchase of used IT equipment, IT professionals most frequently listed the reliability of used equipment (57%), quality of equipment (50%), obsolescence (28%) and retaining service or maintenance contracts on used equipment (26%).

Types of IT Equipment Purchased on the Secondary Market
When asked what types of IT equipment they currently purchase second-hand, respondents most frequently listed servers [less than $100K] (45%), personal computers and workstations (38%), routers (33%), other networking equipment (26%), switches (28%) and storage (24%).

Service Agreements/Fees
Companies most frequently contract with the original equipment manufacturer (44%) for service and maintenance contracts for used equipment. Twenty-one percent hire a third-party service provider. For the respondents that said they contract with the original equipment manufacturer, 26% said that their fees were actually higher for their used IT equipment compared to the fees for new equipment purchased from the same manufacturer.

Methodology

CIO magazine’s Second-Hand IT survey was administered online from June 1 through June 28, 2002. Visitors to CIO.com as well as readers of CIO Insider electronic newsletter were invited to take the survey. Results shown here are based on the responses of 164 IT and business professionals. Not all respondents answered all questions.

In terms of title, 44% of the survey respondents were CIOs, CTOs or vice presidents in charge of IT. Directors or managers of IT made up 33% of those surveyed and 11% were IT staff or IT consultants. In addition, 13% of the respondents had non-IT titles including CEO, COO, CFO, president, vice president, treasurer and director. On average, respondents reported an IT headcount of 37 and the average number of users supported as 2,643.

Survey respondents represented a range of industries including computer-related business (27%), manufacturing (15%), wholesale/retail/distribution (8%) and education (7%).

Fifty-three percent of our survey base worked at companies with fewer than 500 employees while 28% were from companies with 501to 2,499 employees. Thirteen percent of the survey respondents worked in organizations with 2,500 to 9,999 employees and the remaining 10% worked in companies with more than 10,000 employees.

When asked about company revenue, 56% reported annual company revenue of less than $100 million and 28% reported revenue between $100 million and 999.9 million. The remaining 15% reported company revenue greater than $1 billion. The IT budget represented 7% of company revenues on average.

Survey Questions

Which title best describes your level of responsibility?

25%	CIO
9%	CTO
10%	Vice President
20%	Director
13%	Manager/Supervisor
5%	IT Staff
6%	IT Consultant
1%	Chief Executive Officer (CEO)
4%	President, Owner, Partner
0%	Chief Financial Officer (CFO)
2%	Treasurer, Controller
1%	Chief operations officer (COO)
0%	VP Finance/Accounting
1%	VP Oper./Purch./Admin./HR
1%	Director (Non-IT)
2%	Manager/supervisor (Non-IT)
1%	Non-IT Staff


What is your organization’s primary business?

2%	Aerospace
15%	Manufacturing/process industries (noncomputer-related)
4%	Finance/banking/accounting
5%	Insurance/real estate/legal
1%	Government: federal (including military)
3%	Government: state or local
5%	Medical/dental/healthcare >
8%	Wholesale/retail/distribution (noncomputer-related)
2%	Transportation/utilities
4%	Publishing (print / electronic)
1%	Internet access provider/ISP
1%	Communication carriers (telecomm, data comm, TV/Cable)
2%	Construction/architecture/engineering
2%	Data processing services
7%	Education
1%	Research/development lab
1%	Business services/consulting (noncomputer-related)
4%	Other noncomputer-related business
10%	Computer manufacturer (hardware, software, peripherals, etc.)
7%	Computer/network consultant
4%	VAR/VAD/System or network integrator
2%	Computer-related retailer/wholesaler/distributor
4%	Other computer-related business
6%	Other


Approximately how many people are employed by your entire organization or enterprise? (Please include all plants, divisions, branches, parents, and subsidiaries worldwide.)

1%	100,000 or more
1%	50,000-99,999
3%	30,000-49,999
2%	font 20,000-29,999
3%	10,000-19,999
2%	7,500-9,999
6%	5,000-7,499
5%	2,500-4,999
11%	1,000-2,499
12%	500-999
53%	Under 500


Please select the dollar amount that best represents the annual gross sales or revenues for your corporation or firm, include all plants, divisions, branches, parents, and subsidiaries worldwide.

2%	Greater than 40 Billion
0%	$30 billion to 40 billion
2%	$15 billion to 29.9 billion
1%	$10 billion to 14.9 billion
4%	$5 billion to 9.9 billion
6%	$1 billion to 4.9 billion
9%	$500 million to 999 million
19%	$101 million to 500 million
19%	$101 million to 500 million
44%	less than 50 million>


Does your company buy secondary market IT equipment? (By secondary market IT equipment, we mean equipment where your organization is not the first owner of the equipment i.e. used, re-furbished, pre-owned, re-certified.)

77%	Yes
23%	No


Currently, what percent of your IT equipment was purchased on the secondary market?

47%	Less than 10%
14%	Between 11 and 20%
10%	Between 21 and 30%
8%	Between 31 and 40%
8%	Between 41 and 50%
5%	Between 51 and 60%
3%	Between 61 and 70%
3%	Between 71 and 80%
1%	Between 81 and 90%
2%	Between 91 and 100%


Will your organization’s spending on secondary market IT equipment increase, decrease or stay the same over the next 18 months compared to current levels?

46%	Increase
7%	Decrease
47%	Stay the same


By what percent will your spending on secondary market equipment increase or decrease?

54%	">Less than 10%
24%	Between 11 and 20%
9%	Between 21 and 30%
4%	Between 31 and 40%
4%	Between 41 and 50%
2%	Between 51 and 60%
1%	Between 61 and 70%
1%	Between 71 and 80%
0%	Between 81 and 90%
2%	Between 91 and 100%


What is the primary reason that your company purchases secondary market IT equipment?

41%	Lower capital expenses
15%	Budget constraints
3%	IT hardware no longer available new
6%	Lower ongoing support expenses/total cost of ownership
30%	Performance of new equipment vs. secondary doesn’t justify investment
6%	Other


Where do you purchase secondary market IT equipment from? (Check all that apply.)

31%	Hardware manufacturer
48%	IT distributor/broker/dealer of new and secondary IT equipment
31%	IT distributor/broker/dealer of secondary equipment only
10%	IT services organization - new and secondary IT equipment
8%	IT services organization - secondary equipment only
15%	Lessor/leasing organization
13%	IT equipment auction (live/in-person)
35%	IT equipment auction (online)


What types of IT equipment do you purchase secondary market currently? (Check all that apply.)

38%	Personal computers/workstations
27%>	Printers
45%	Servers (less than $100K list price)
18%	Midrange servers (greater than $100K list price)
5%	Mainframe
33%	Routers
28%	Switches
31%	Other networking equipment
26%	Storage
7%	Other


What other types of IT equipment would you consider purchasing secondary market? (Check all that apply.)

28%	Personal computers/ workstations
20%	Printers
31%	Servers (less than $100K list price)
17%	Midrange (greater than $100K list price)
6%	Mainframe
28%	Routers
30%	Switches
26%	Other networking equipment
24%	Storage
5%	Other


Typically, who do you have a service or maintenance contracts with for your secondary market IT equipment?

21%	Not answered
44%	Original manufacturer/vendor
23%	Third-party service provider
1%	Leasing organization
11%	Other


Typically, which organization actually services/maintains your company’s secondary market IT equipment?

48%	Original manufacturer/vendor
36%	Third-party service provider
3%	Leasing organization
13%	Other


Typically, are the fees or costs of maintenance/service agreements for secondary market IT equipment higher, lower, or the same new IT equipment?

19%	Higher
25%	Lower
56%	Same


If you have service of maintenance contracts with the original hardware manufacturer for secondary market IT equipment, are the fees or costs of maintenance/service agreements for secondary market IT equipment higher, lower, or the same as new IT equipment?

26%	Higher
14%	Lower
60%	Same


What are your biggest concerns or challenges regarding purchasing secondary market IT equipment?

50%	Quality of equipment
2%	Resale value to your organization
57%	Reliability of equipment
16%	Re-certification costs
26%	Retaining service/maintenance agreements on secondary market IT equipment
12%	Violating existing licensing agreements with hardware manufacturer
28%	Obsolescence of secondary market IT equipment
9%	Other


What is your IT budget in dollars?

39%	Less than $1 million
14%	1 to 1.9 million
5%	2 to 2.9 million
2%	3 to 3.9 million
4%	4 to 4.9 million
4%	5 to 9.9 million
8%	10 to 49.9 million
4%	50 to 100 million
0%	100 to 249.9 million
2%	250 to 499.9 million
0%	500 to 999.9 million
0%	1 billion to 1.5 billion
0%	Greater than 1.5 billion

Source: CIO.com

NHR News

CIO Research Reports: Second-hand IT

CIO Research Reports: Second-Hand IT

Executive Summary

Key Findings

Methodology

Survey Questions

WHY BUY REFURBISHED

COUNT ON
QUALITY AS
GOOD AS NEW

PRODUCT SPECIALS

NHR News

CIO Research Reports: Second-hand IT

CIO Research Reports: Second-Hand IT

Executive Summary

Key Findings

Methodology

Survey Questions

WHY BUY REFURBISHED

COUNT ONQUALITY ASGOOD AS NEW

PRODUCT SPECIALS

COUNT ON
QUALITY AS
GOOD AS NEW