Tech Data’s Take On Certified Pre-Owned IT Gear
February 22, 2021 Timothy Prickett Morgan
It may be ironic, but even the largest sellers of new datacenter equipment in the world sometimes have to – and eagerly want to – sell used IT equipment. And if they are smart – and the executives at Tech Data certainly are on behalf of their downstream reseller and end user customers – they stick to certified pre-owned equipment with the backing of the original equipment manufacturers.
When Tech Data was founded in Clearwater, Florida by Edward Raymond in 1974, the company sold various peripherals and supplies for minicomputer and mainframe systems. The company branched out into PC distribution a decade later, and two decades ago Tech Data made more aggressive moves to come back into the datacenter when it started reselling IBM servers, among other brands. Five years ago, Tech Data bought the Technology Solutions business from the distributor Avnet, which also resold gear. That acquisition made Tech Data a powerhouse in IT distribution, with more than 125,000 downstream resellers, and more than 150,000 IT products from more than 1,000 vendors in its catalog, driving $37 billion in sales in 2020 across more than 100 countries where it does business.
But not everyone can buy new equipment, and Tech Data realizes this. To better understand why Tech Data sells secondhand gear, we had a chat with Phillip Privett, vice president of vendor management for IBM, who has been at Avnet and Tech Data in senior sales, marketing, and management roles for IBM, Hewlett Packard Enterprise, and Cisco Systems gear for more than two decades.
“When we started our IBM business more than 20 years ago, we had a refurbished systems business,” explains Privett. “It has always been a significant part of our business because customers need that kind of product. It’s not something we would walk away from for that reason. That’s our job: To be distribution support for IBM upstream from us and for our resellers downstream from us.”
Some terminology is probably in order here, just so we are clear in our language. There are different kinds of used equipment out there in the world. There is stuff that you buy off the back of a truck or out of a warehouse out on the edge of town that comes from a broker/dealer, and then there is other stuff that may be refurbished a bit and perhaps comes with a limited warranty or even possibly third party maintenance of some sort for an incremental cost. And then there is certified pre-owned gear (CPO), which comes either directly through the original equipment manufacturers (as it does with IBM through its Global Asset Recovery Services division) or through anointed and appointed designated third parties.
In the case of IBM, Privett says that the tight coupling between the IBM Services support, IBM Global Financing and IBM Global Asset Recovery Services, which refurbishes, recertifies and resells gear it takes back from customers as part of IBM leasing programs, makes customers comfortable getting CPO gear. In fact, Tech Data primarily resells CPO gear to its channel partners who need used, and very rarely does it not sell such gear with hardware and software maintenance contracts that come from IBM, because that’s what their clients want. The equipment Tech Data distributes is too mission critical to skimp on such things. The substantial savings many customers can get with CPO equipment compared to shiny new gear helps pay for hardware and software support that should always be backing up the gear in the first place.
“If end user customers are buying purely used gear, you are going to get what you get,” says Privett. “And there can be challenges with that. You can have service level issues. You can have issues with the gear itself, and maybe there is a reason why it is out there on the used market.
Privett continues, “OEM recertified products are what customers want. They want to make sure that the vendor is standing behind it. In this case, with Power Systems, Tech Data has the ability to get IBM service on that equipment and our channel partners feel comfortable there are not going to be any hiccups. If you have gear that is one or two generations back, you need that kind of product support. Quite honestly, it is simply too risky for any CEO to not have that level of service on all it’s critical IT.”
While this publication focuses on Power Systems, Tech Data also resells IBM storage and even IBM System z mainframes, which is worth pointing out. The same benefits of CPO gear apply to these platforms, obviously.
There are a number of reasons why Tech Data’s customers – in this case the hundreds of resellers who in turn serve tens of thousands of Power Systems customers – go for certified pre-owned equipment from IBM.
One of the major reasons is the need to support legacy applications running on vintage IBM i and AIX releases that have not – and in many cases cannot – be moved forward to more current releases. And therefore, they need to be running on older Power Systems hardware that runs these older operating system releases.
“There are a lot of legacy applications out there, and the amount would shock us all – even in large corporations,” Privett says, confirming many of our own suspicions. “These systems were designed and built a long time ago, and remain foundational and relevant to the company. Many have not been overhauled to even Power8 or Power9 machinery.”
The need for legacy hardware is so pervasive, there’s a nomenclature to clarify generations.
“We call that N-X, where X is 1 for one generation back or 2 for two generations back, or even sometimes 3 or 4 in extreme cases for gear further back in time. This happens a lot, and we see such customers every day,” said Privett.
It’s not only legacy hardware that creates this demand. The upgrade path for many businesses can’t be made in a single hop. To ensure business continuity while evolving software and other technologies, companies strategically upgrade using certified pre-owned (CPO) to advance their entire tech stack.
“We see older machines being used as a two-step upgrade – businesses sometimes need a middle stone to cross from where they are to where they need to be as part of an upgrade path. In other cases, the CPO sale is driven by cost issues. In 2020, because of the impact of the global pandemic, the CPO sale had more to do with a slowdown in the supply chain and demand, and customers need to get machinery in a hurry that was cost effective.”
The other reason that Tech Data works through IBM Global Asset Recovery Services to get certified pre-owned equipment into the hands of Power Systems shops that need it is peace of mind. And that is peace of Mind for the end user customer who ultimately be running applications on this CPO equipment, the reseller who sells it to them, and Tech Data itself who brokers the deal between the reseller and Global Asset Recovery Services. All machinery that comes back to IBM is broken down into component parts, certified that the parts are genuine IBM parts, and then built using the same factory processes that new gear uses. All of the storage media has absolutely all of its data wiped clean, so there is no security issue or malware risk. And because the used gear is certified by IBM, there is no issue getting hardware and software maintenance from IBM itself for this machinery and their operating systems and middleware software. It is all legit – and safe.
For those Tech Data customers who hang back at the N-1 or N-2 or even deeper levels on the hardware and the software, they already know the secret of doing this and the economic benefits they derive from hanging back – which is only possible because that hardware was great for its time and continues to be good or at least good enough in a future time. But these customers already know. The issue here is that resellers downstream from Tech Data need to be reminded of this resource, and so do their many Power Systems customers who are even further downstream. New is not the only option, and in fact, there is refurbished Power9 equipment in the channel now as customers have been doing takeouts and upgrades for a year or more IBM, and that is as current as new even if the supply is understandably thin. It is the customers who don’t know they don’t have to buy new off the back of a truck from Acme Computers who need to know they can work with their existing resellers to work through Tech Data to get vintage systems or even new-ish ones while supplies last from IBM Global Asset Recovery Services. They have options, and they are good ones at that.
One last thing. While certified pre-owned equipment is attractive on the front end, there are other environmental reasons that this gear is sought out and several green benefits that accrue to those who use it. Obviously, extending the life of a complex piece of machinery that took a lot of energy to produce is good for the environment, and in this sense, CPO gear can reduce the carbon footprint of those who use it. Moreover, IBM is a leader in using sophisticated methods of refurbishing and recycling this gear.
“IBM is the benchmark here, and does an excellent job,” says Privett. “Everything surrounding data protection got more serious after HIPAA and we all had to pick up our game when it came to protecting data. But honestly, IBM has always done a good job and it was really a case of carrying on their approach, not needing to make major adjustments. IBM has always had an outstanding offering here.”
This content was sponsored by IBM.