Article as printed in TelecomFinder.com Magazine, November 2008 Issue.

20 Years of the Used Telecom Equipment Business

Written by Craig Zimmerman (An Interview with BIZI)

Since getting its feet wet with Wang minicomputers in the mid-80s, Bizi International (www.bizi.com) has grown into a leading supplier of networking and test equipment and VoIP solutions for customers around the globe. Brian Reslow, Bizi’s President, and Tim Woodward, the firm’s e-business manager, have been there since the beginning, and both have a bird’s eye view of the decades that took us from the days when Tim Berners-Lee created the World Wide Web (after, of course, Al Gore invented the Internet) to the days when business as we know it wouldn’t be possible without it. Recently, Brian and Tim sat down with us to give PowerSource Online, The Magazine readers an overview of the last 20 years of the used technology equipment business.

The Late 80s

In late 80s, the bulk of Bizi’s business was in minicomputers. But when Wang imploded in the early 90s, Bizi shifted its focus to take advantage of the growing popularity of networking. “We were one of the earliest ones doing the first generation of Cisco routers,” Brian explains. “The world of networking back then really hadn’t gotten up to speed with the world of routers. It was really a hub world back then. Switches weren’t even in vogue at the time. So, we were doing hubs and the early versions of the Cisco routers.”
But it was only after Cisco introduced their second-generation routers that the market for used networking equipment began to take shape. “There was a big transition point at that time away from hubs into the router space that was coming online,” Brian says. “When Cisco came out with their second generation of routers, that’s when the older, marginal routers came on the market as used, and we got involved at that time.”

The Early 90s

As the popularity of networking grew in the 90s, the number of networking equipment manufacturers fell. Wellfleet and Bay Networks were absorbed by Nortel, for example, and Cisco, according to Brian, was in acquisitions mode. “They bought 60, 70, maybe 80 companies during that ten-year period. There was a lot of consolidation, a lot of roll-ups, and we kind of rode the boom those years,” Brian says.
As Tim notes, this time period saw “a lot more equipment available in the market” and a corresponding rise in the acceptance of used telecom equipment. And it didn’t take long for the manufacturers themselves to notice, though they were wary of getting their hands dirty in the resale game. “They didn’t really want to cannibalize their new sales,” Brian says. “They themselves did not want to get involved in the used space. That changed towards the end of the decade. They saw a lot of money on the table and a way to keep the loop tight with customers.”

Still, Bizi and other resellers were able sell used equipment at 60% to 80% off list price, compared to the 50% discount offered by many major manufacturers. In response, OEMS often offered discounts on new equipment if customers agreed to stop buying used equipment from dealers like Bizi. But according to Brian and Tim, many of those who were lured away by two to three percent discounts on new gear eventually came back. “Cisco, Nortel, or any of the OEMs would recover the 2% somewhere,” says Brian.

Y2K, 9/11, and the Dot Com Bust

Y2K, largely a non-event in the telecommunications sector as a whole, did little to change the course of the used equipment market. “I think it was kind of steady as you go,” Brian says. Tim adds that the fear, though, was real enough: “They had no idea – because everything was interconnected – what the effect was going to be. So, I’m not really sure it was a marketing hype or driven by anybody. The atmosphere, from an telecommunications standpoint, was ‘I need to look at my gear and possibly upgrade it’ because there became a world mentality that none of us were safe. That probably also parlayed into some hardware upgrades, because if you had mid-90s technology, then you had to upgrade your hardware. It wasn’t a direct cause, but because they’d been hanging on for a long time, this was a real reason to justify the upgrades to the routers.”
But whether Y2K was an invention to drive sales, a near-miss apocalypse, or a mix of the two, no one would argue that the first two years of the millennium would significantly change the used equipment landscape right up until the present day.

When the dot com world busted in 2000, “There was a big explosion in more dealers coming to market,” notes Brian. “There was so much equipment that was flowing in the marketplace that it actually spawned many, many, many dealers. Anybody who was thinking about being in the used space got into the used space.” And according to Tim, “It definitely elevated the acceptance of used equipment. After the bust, there were a lot of companies that were on the bare minimum. The market was flooded with more and better equipment. A lot of this stuff was less than two years old and it was fairly high-end equipment.”

“A lot of companies that were startups went belly up, and that put a flood of equipment on the street,” Brian agrees. “Then 9/11 put a lot of financial strain on a lot of companies and fear in the marketplace. I think that double whammy actually accelerated what we were doing.” That, and the fact that Bizi International was prepared to meet the needs of its growing customer base. “We were positioned well, having gotten in into the networking equipment in the early 90s,” Tim says. “We had a good customer base. As one of the major players, we’d been waiting for it (used equipment) to become more and more acceptable.”

2004 to Tomorrow

From the upheavals of the early part of this decade until around 2003, demand for used telecom equipment was sufficient to support most of the resellers in the networking space. “I think there was enough to go around in the earliest part of the decade,” Brian agrees. But today, “I think that there are too many of us,” he says. “I think there will be more challenges. There will be more pressure on us to keep trying to diversify and look for niches. I don’t think there’s a lot of growth in it from a hardware standpoint. It’s all become software driven today. Cisco really is a software company, not a hardware company. The software is just embedded in metal, paint, and a power cord.”

Still, there will always be a role for resellers like Bizi International. “It’s still a physical world, and the software cannot talk to the world unless it goes through hardware. You still need hardware to interface with the world,” Brian says. And, as Tim notes, used hardware may not provoke the oohs and ahhs that a brand new Cisco router might, but reliability and proven utility – especially in times like these – can be an asset all to itself.

End of Article.

After 20 years of being in this industry we are still here and thriving even in this difficult economy.
As a company, we know the value of diversifying, improving on what you know and putting the customers need first.
That’s why we now carry a complete line of refurbished used test equipment in addition to the used telecom and used network equipment.
We hope you found this article interesting and informative.

Thanks, Tim