Used servers: Bargain or too good to be true?

Enterprise IT teams are always on the lookout for ways to save money or gain operational efficiencies. One approach is to purchase used data center equipment such as servers, rather than investing in brand new systems and paying top dollar.

There’s no shortage of resellers who cater to this market. Some equipment resellers specifically target gear from hyperscalers, because the hyperscalers replace their hardware at a fast pace, and the equipment they turnover can be more powerful than what most enterprises use today.

Those in the business of selling used equipment say demand for their offerings is high.

“We’ve been selling more used IT equipment to the data center than we ever have before, going all the way back to 1995,” says Corey Donovan, president of Alta Technologies, which buys and sells new, used, and refurbished servers. The number of new clients for the company has doubled this year compared with last, he says.

Buying used IT assets isn’t without risk, however. Here are some of the key factors for and against this approach.

Pros of buying used data center equipment

One of the biggest potential benefits of buying used hardware is cost savings compared to new system purchases.

“Used equipment can be significantly less expensive than buying new assets, and can still have many years of stable, usable life,” says Zac Smith, chairperson of Open19 Foundation, a community-based organization for open-source hardware and software, and managing director of IT infrastructure provider Equinix Metal.

Buying used “can help you build out a data center for a fraction of the price,” adds John Li, co-founder and CTO of Fig Loans, a finance lending company. “As with any used purchases, it comes with more risks. Beware that some prices are ‘too good to be true,’ and if you choose to buy used you should only source your equipment from a reputable [seller]. They should be easily able to walk you through their test/repair process, and offer you limited guarantees on their products.”

Businesses can deploy used data center hardware if they don’t need cutting-edge technology, Li says. “The infrastructure that Facebook or Google uses, for example, [is] going to be leaps and bounds beyond your average data center needs, so there are plenty of opportunities to scoop up older equipment that still has plenty of life left in it,” he says.

Used equipment can run as well as new equipment “when you find the right seller,” says Peter Strahan, founder and CEO of Lantech, a managed IT services provider. “This allows you to rapidly cut the costs of a data center with used equipment.”

In addition, deploying used IT equipment is generally good for the environment, Strahan says. “While the equipment could theoretically be recycled, it takes a lot of manpower,” he says. “Finding a use for it after it becomes obsolete saves a lot of time and money when it comes to recycling and stops the equipment going to the landfill.”

A lot of companies “value the ‘green’ benefits of redeploying hardware,” says Cameron James, executive vice president of CentricsIT, a global IT services provider. “The best way to reduce IT waste is to use any product to its maximum lifespan, without compromising on performance. This is easy to do. Many used products are N-1—just one generation back from the latest OEM lines.”

It can also make sense to buy used equipment if an organization has moderate powering needs in its data center, Strahan says. “If you have large powering needs, you will need the most efficient equipment,” he says. “Whereas if you have less-than-normal power needs, you can easily get away with using used equipment as the newest upgrades in equipment might not be so necessary in a smaller powering situation.”

This is why it’s important for organizations to know what sort of power situations they require, Strahan says. “If you have large requirements, then you may struggle to find the right hardware outside of the most up-to-date and new systems,” he says. By identifying specific areas where used hardware can be maintained most effectively, companies can make more informed decisions about where to implement used systems.

Another benefit of sourcing used IT gear is the near-term availability of the products. “The equipment is in stock and ready to ship—no lead times,” James says. “Especially now, when we’re seeing lead times for new hardware into the hundreds of days, being able to receive what you need overnight is critical.”

The IT supply chain “has been a nightmare these past couple of years, with clients telling us some backlogged orders have had a birthday,” Donovan says. “Complex items such as Cisco Meraki switches have faced particularly long delays in delivery.” Companies that refurbish equipment “actually have the servers and switches on the shelf, ready to ship, so you can start your project tomorrow,” Donovan says.

Another plus is an “enormous expansion” of third-party maintenance companies has given IT managers choice when it comes to supporting their used equipment, Donovan says. “Ninety-nine percent of our buyers have zero issues getting used equipment under the OEM’s maintenance plan, but the rest can turn to expert third-party maintainers” for support, he says.

Cons of used servers and network equipment

Used data center equipment by definition is older, which could lead to a host of issues.

“You’re working with an older product, which inevitably means it’s less advanced,” Li says. “If the function is still optimal, you’re in the clear. But suppliers won’t offer support or service indefinitely. Your equipment will reach end-of-life status sooner than something new, reducing or eliminating the patches, security fixes, and firmware updates from the manufacturer. When you can no longer secure your data center properly, your entire business is put at risk.”

Along with lagging updates, “you may find yourself paying more for maintenance with used equipment,” Li says. “Parts are likely to break down as they age, and replacement parts are costly, if not impossible to come by. You may end up hiring third parties to build band-aid solutions, which quickly becomes more costly than upgrading.”

It’s a good idea to go through a trusted third party that offers guarantees and puts equipment through rigorous testing processes, Li says. “Though you may not have the same warranty as you would with new equipment, you shouldn’t be assuming all the risk for malfunctioning equipment,” he says.

To find the right supplier, “do your research to ensure you’re buying from a reputable equipment provider” that adheres to the rigorous testing and repair process, Li says. “Some resellers might try to cut corners, and if you buy a used system that doesn’t operate well, you’ll end up spending even more in the long run than buying brand new,” he says.

Another downside is that transfer agreements—legally binding documents that convey ownership from one entity to another—for the purchase of used equipment can be expensive.

“For medium and enterprise businesses, deploying used—secondary market—networking equipment in a data center would never be my recommendation,” says David Lessin, director of network operations and research at global technology research and advisory firm ISG.

“There are limited circumstances where previously owned equipment is a viable option, but only if the buyer, seller and the OEM can execute a transfer agreement,” Lessin says. “However, the cost to negotiate a transfer could obviate any savings.”

In addition, the authenticity of every microprocessor in a previously-owned device is not likely verifiable, “and as a result, many types of enterprises should simply avoid used equipment,” Lessin says. “The costs of a breach or data leakage will exceed any savings.”

Another potential pitfall is the existence of “ghost companies” in the industry that carry no inventory and don’t even have a proper business location, Donovan says. They serve only “to drop-ship equipment from stocking vendors,” he says. “These drop-shippers only have a web site and an outbound call center and email team situated overseas.”

With the current pace of technological change, secondary market equipment will effectively have a short life span, which impacts the return on investment (ROI), Lessin says. “With virtualization, commercial off-the shelf hardware with modernized networking software could have a better ROI than that available in secondary markets,” he says.

Also, older equipment might not be as energy efficient. “Around every two to four years, most data centers will completely refurbish their equipment to find better equipment that can use less energy, less electric, is more efficient, smaller, etc.,” Strahan says. “When you are running a data center, your main goal is efficiency and productivity. Anything that moves in the other direction is just counterintuitive.”

Because technology evolves so rapidly, “even equipment that’s only a year or two old might no longer be as efficient, which can drive your energy and cooling costs up significantly,” Li says. “When you’re buying used, you’ll want to measure cost savings both on the sticker price and monthly maintenance.”

Older equipment might not necessarily be faulty or inefficient, but simply obsolete, Strahan says. “While used equipment may save you money, it could easily reduce productivity,” he says. “Of course, with used equipment the risk of it becoming faulty will naturally be higher. This will lead to wasted time and resources on maintenance and service, which in turn will reduce your savings greatly.”