Why Buy Pre-Owned?

UsedCisco.com Buyer's Guide - 2009 Revised Edition

Download PDF 1.3 megs

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Table of Contents

• What is pre-owned network hardware ?
• Where does pre-owned hardware come from ?
• • Trade-in programs & network upgrades
  • Off-lease equipment
  • Excess Inventory
  • Auctions and liquidations
• How do I select an appropriate vendor ?
• • Credibility
  • Product quality
  • Level of service and support
  • Technical knowledge
• What service and support options are available ?
• • Warranty periods
  • RMAs
  • Tech support
• How do I avoid buying counterfeit hardware ?
• How much will I really save ?
• How does buying pre-owned help save the environment ?
• About UsedCisco.com
• • The UsedCisco.com advantage
  • 28 point quality control checklist
  • Our growing customer base
  • Contact us
• Appendix
• • References
  • Glossary

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What is pre-owned network hardware ?

Pre-owned hardware is any equipment which is not sold as new directly from the manufacturer or channel partners. Many vendors, companies and auctions use varying terminology, including “re-certified”, “used”, “refurbished”, “new-in-box”, “new-open-box”, “Certified Pre-Owned”, “the secondary market”. While they are often used interchangeably, many factors dictate what exactly is being sold, and the common adage applies - “buyer beware”.

Yet, an incredible array of organizations from both the public and private sector are buying pre-owned. These organizations include global public commercial enterprises, small businesses, ISP’s, telecoms, non-profits, local and US government, military and educational institutions of all kinds.

Although many manufacturers have down played the market’s growth, tremendous demand has given rise to nearly a three billion dollar market, with thousands of sellers, companies and eBayers. Finding a reliable vendor can be a daunting task for any network administrator looking to reduce costs.

This uncertainty and lack of knowledge is exactly what led us to create a small FAQ back in 2000, when the market was in its infancy. Since then, our guide has seen eight revisions and over 50,000 downloads.

An overwhelming majority of the customers we’ve surveyed mention the same fact - they just didn’t know pre-owned was a real, safe and viable option. Significantly lowering networking costs seemed like an unattainable goal, until they discovered the pre-owned market through research and experimentation.

In this guide, we’ll present you with critical information you need to make the switch, become a pre-owned evangelist and start saving instantly.

“A CIO.com (CIO Research Reports) survey found that the majority (77%) of companies surveyed buy second-hand or pre-owned IT equipment, including PC’s, servers and networking hardware, and close to half of the respondents expect to increase their spending on pre-owned IT products in the next 18 months.”

-- Second-Hand IT: www.cio.com

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Where does pre-owned hardware come from ?

Trade-in programs & network upgrades

Companies of all sizes continuously upgrade and de-install network infrastructure to meet the changing needs of their customers, employees and suppliers. Manufacturer trade in programs are often inadequate and offer customers little financial incentive for prolonging their hardware’s lifespan. Thus, millions of dollars of useful network hardware enters the secondary market annually.

Off-lease equipment

Equipment leases typically range from one to three years, leaving the lessor with functioning hardware well before the end of lifespan.

Excess inventory

Distributors, enterprise, government and military institutions purchase large quantities of equipment in bulk. Their inventory often exceeds their needs, resulting in warehouses worth of unused equipment. This was evident during the dot com bubble, when CIO’s flush with venture capital cash irresponsibly stocked up in massive quantities. While network managers today attempt to manage spare inventory thriftily, spares for redundancy and disaster recovery is still an executive priority. This leads to the annual sale of huge lots of unused equipment simply because upgrades precede their use.

Auctions and liquidations

A tremendous surplus of new and pre-owned equipment emerges from companies burnt in bankruptcy, such as Bear Sterns, Enron and Global Crossing Ltd. Businesses undergoing mergers, acquisitions, relocations and downsizing also result in large quantities of unnecessary equipment. These are sold in volume at high discount to the secondary market.

“Gartner Group estimates that the secondary market for networking equipment and accessories has grown over the past several years from a handful of providers to more than 400 companies with an estimated collective revenue of $2 billion to $3 billion.”

-- Government Procurement Magazine

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How do I select an appropriate vendor ?

While the terminology for pre-owned varies from seller to seller, the important factors to consider are not the seller’s choice of words, but rather their reputation, experience, processes and policies.

When considering a seller, ask these questions ...

regarding credibility :

• Is the seller’s online presence professionally designed & developed?
• Is online business conducted securely (SSL certificates, 3rd party certifications)?
• Are phone numbers, email addresses, and a physical address displayed?
• What customer references are provided?
• What processes are in place to avoid counterfeit goods?
• What is the financial condition of the business?
• Is the seller’s customer base local, regional or international?
• How long is the seller in business?

regarding product quality :

• What is the origin of the equipment?
• How are products tested and re-certified?
• Does the seller guarantee genuine equipment?

regarding level of service & support :

• What type of warranty options are available?
• What happens in the event of a part failure?
• What is the turnaround time for a replacement?
• What pre and post-sales support options are available?

regarding technical knowledge :

• Are certified Cisco engineers available in-house?
• Is the seller an active voice in the industry, publishing content via blogs, articles and guides?

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What service and support options are available ?

Manufacturers often create obstacles to discourage sales of pre-owned products. Cisco has been specifically criticized for not honoring software upgrades for products purchased without SMARTnet, their proprietary maintenance contract program.

To compensate, secondary market sellers have made great strides by providing comparable services at almost half of manufacturers’ current rates. Sellers offer included warranty periods and next-day faulty hardware replacement, as well as optional maintenance contracts, consulting services and various tech support packages.

Warranty periods

Sellers often include a free 90-day warranty, similar in length to most manufacturers’ warranty period. Select sellers now offer included one year warranties, with optional extensions for longer periods.

RMA

Many sellers offer protection covering hardware failure and malfunction. Verify processes are in place for identifying and troubleshooting faulty hardware, arranging for next day replacement and when requested, allow refunds or accept trade-ins for credit.

Tech support

Support options vary from seller to seller. Two main types of support are:

• Pre-sales support - Network analysis and design, complex configurations, part search, part identification and compatibility
• Post-sales support - Troubleshooting, installation, upgrade walkthrough, integration
• On-site support - Wiring and cable runs, physical installation, testing, consulting

Support packages vary based on time, usage and complexity.

• Maintenance contracts - Pre-paid, hourly time blocks, optional 24 x 7 phone and email support, next-day hardware replacement
• Hourly phone / chat support - “Pay as you go” support
• Partner/reseller level contracts - On-site consulting, complex custom configurations

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How do I avoid buying counterfeit hardware ?

China’s policies regarding intellectual property infringement and state-sanctioned piracy have become a growing global concern. Tremendous growth of the network hardware secondary market, as well as an upturn in Chinese manufacturing have combined to push these fears to new heights.

Counterfeit Cisco equipment, known in the industry as “Chisco” (counterfeit Cisco equipment originating in China) are being created at an alarming rate. According to a white paper by AGMA and consulting company KPMG, counterfeit products account for nearly 10% of the overall IT products market. That’s $100 billion in fake memory sticks, drives, monitors, networking gear and other IT products in circulation. “The vast majority is still being purchased from gray market, uncertified resellers that unload their goods on eBay at extremely low prices,” said Scott Augenbaum, supervisory special agent for the FBI Cybercrime Fraud unit in Washington, D.C.

Network managers have often shied away from pre-owned hardware simply because it was too difficult to identify counterfeit equipment. However, a recent flurry of increased awareness and information has restored confidence in the pre-owned market. In this guide we present the latest information available, made public by a handful of resellers and industry sources determined to combat counterfeiting and prove the legitimacy of the secondary market.

“Our organization, along with many others, have kept this information private for fear of tipping off counterfeiters and assisting them in perfecting their efforts, “ explains Steven Dale, web director at UsedCisco.com.

“We’ve decided to adopt a new strategy. By disseminating this information, we feel the benefits will outweigh the perceived risks. This is similar to the controversy that initially surrounded the practice of publicizing network security vulnerabilities. The first whistle blowers were frowned upon until it became clear that their information forced manufacturers to react quickly.

The net result was a level of quality that never would have been reached otherwise. It’s an external constant, a system of checks and balances. Here too, vendors, customers, and especially manufacturers must react to these challenges rather ignore them.”

Counterfeit Cisco Indicators
SCREWS	Genuine Dull Screws, fine lines Counterfeit Droopy & shiny screws; lines are imprecise and seem sand cast.
WELDING	Genuine Clean, precise Counterfeit Inconsistent, messy
SERIAL NUMBER STICKER	Genuine Sans-serif typeface (font), tight letter spacing, inconsistent typefaces between multiple stickers Counterfeit Sloppy letter spacing, serif typeface, bar code not flush with sticker edge
RJ45 CONNECTORS	Genuine Finely extruded connectors ( 1/16” to 1/32”), multiple metal attachments Counterfeit Flush connectors, two metal attachments
POINTS ON BOARD	Genuine Silver points on main board generally indicate genuine Counterfeit Copper points on main board generally indicate counterfeit
PACKAGING	Genuine Consistent typography, high quality materials Counterfeit Absence of a seal on back identifying weight, low resolution printing

“ICE and CBP seized more than 74,000 counterfeit Cisco networking products and labels with a retail value of more than $73 million.”

-- U.S., Canadian Agencies Seize Counterfeit Cisco Gear : itworld.com

Qualifying sellers

For most buyers, visual inspection before purchase isn’t an option. This fact alone emphasizes the need to buy solely from credible sources which require proof of original ownership for all incoming inventory. In situations where goods bought from eBay or other questionable sources are suspected as counterfeit, a basic understanding of identifying factors is critical.

Buying secondary network hardware is not a risky endeavor for the educated buyer. Here are a few tips you need to help locate a qualified reseller.

Be vigilant about who you purchase from. Make sure you use a reputable reseller — this includes getting the company’s history in business, references and warranty replacement policies. Avoid buying via eBay, deal directly with resellers who have a long and good standing history in the industry and a written replacement policy guaranteeing the authenticity of their products.

The best indicator of a fake is consistently going to be price. A 50% to 95% discount off list price is standard in the secondary market. However, a red flag should be raised if you are getting quotes or see prices listed between 40% to 55% off list, brand new in a sealed box. Standard discounts usually range from 15% to 25% off list price on new/sealed hardware (not including schools and government accounts).

Make sure you are being quoted a fair and realistic price. Expect a reasonable discount, but too big of a discount is a sure sign of trouble. Remember the old adage, ‘If it seems too good to be true, it often is.’

Contrary to popular belief, refurbished or reconditioned secondary market technology presents no greater risk than new equipment. Quality control programs and warranties or maintenance initiatives offered by most providers mitigate the risk.

For more information, see How Do I Select an Appropriate Vendor?

“In two years, we’ve driven out about a quarter of our operational costs,” says the CIO of Tenneco Automotive, a $3.5 billion auto parts manufacturer in Lake Forest, Ill. “I told a CIO about that, and he thought I was joking. I’m not ... A large part of that savings has been leveraging the secondary market.”

-- Good Stuff Cheap : CIO.com

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How much will I really save?

While market conditions affect pricing daily, you can generally expect to save between 50% to 90% off list price. Here is a cost-benefit analysis for three sample networks.

Based on UsedCisco.com pricing as of July 2009. Unavailable items (N/A) are calculated as list price in total analysis.

Qty	Part number	List price (per unit)	Pre-owned price (per unit)	SAVINGS
Small office: 1-10 users
1	Cisco 1721 Router	$ 1,195.00	$ 99.00	92 %
1	Cisco PIX-501-BUN-K9 Firewall	$ 595.00	$ 300.00	50 %
1	Cisco WS-C2950-12 Switch	$ 895.00	$ 150.00	83 %
PACKAGE TOTAL (all quantities) :		$ 2,685.00	$ 549.00	--
		TOTAL $ SAVED : 2,136.00
Small office: 1-10 users
2	Cisco 3745 Router	$ 12,000.00	$ 499.00	96 %
1	MEM3745-128CF 128MB Flash	$ 700.00	$ 62.07	91 %
1	MEM3745-256D256MB DRAM	$ 2,000.00	$ 132.61	93 %
2	Cisco WIC-2T Card	$ 700.00	$ 130.00	81 %
1	Cisco PIX-515E-UR-BUN Firewall	$ 6,995.00	$ 1,300.00	81 %
1	Cisco PIX-515E-FO-BUN Firewall	$ 3,000.00	$1,375.00	54 %
2	Cisco WS-C3560G-24PS-S Switch	$ 5,595.00	$ 3,200.00	43%
1	Cisco CISCO2811-CCME/K9 CME	$ 3,695.00	$ 2,375.00	36%
10	Cisco CP-7940 IP Phone	$ 545.00	$ 125.00	77 %
PACKAGE TOTAL (all quantities) :		$ 58,430.00	$ 14,152.68	--
		TOTAL $ SAVED : 44,277.32
Large office / datacenter: 100+ users
2	Cisco 7206VXR/NPE-G1 Router	$ 22,000.00	$ 9,350.00	58 %
1	Cisco PIX-525-UR-BUN Firewall	$ 12,995.00	$ 950.00	93 %
1	Cisco PIX-525-FO-BUN5 Firewall	$ 5,000.00	$2,125.00	58 %
2	Cisco WS-C6509 Switch Chassis	$ 9,995.00	$ 1,235.00	88 %
1	Cisco WS-SUP720-3BXL Engine	$ 40,000.00	$ 14,850.00	63 %
3	Cisco WS-X6348-RJ-45 Switch	$ 12,995.00	$ 135.00	99 %
1	CISCO2821 Router for IP gateway	$ 3,895.00	$ 1,299.00	67 %
1	Cisco MCS-7825-H1 MCS	$ 9,000.00	N/A	N/A
100	Cisco CP-7960 IP Phone	$ 645.00	$ 139.65	78 %
PACKAGE TOTAL (all quantities) :		$ 238,365.00	$ 54,764.00	--
		TOTAL $ SAVED : 183,601.00

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How does buying pre-owned help save the environment ?

The problem

Rapid technological change, low initial cost and even planned obsolescence have fueled a high rate of turnover for network hardware appliances, creating a fast-growing problem around the globe.

According to an EPA study in 2005, 1.5 to 1.9 million tons of e-waste are created annually. Accumulated e-waste is often processed in poorly managed facilities in developing countries, leading to significant health risks and causing a major negative impact on the environment.

The United Nations warns that people could be exposed to health risks at both ends of the short life span of networking equipment. Chemicals such as brominated flame retardants and heavy metals, including lead and cadmium contaminate water supplies, emit harmful gases that contribute to global warming and pose serious health risks to factory workers worldwide.

The problem is growing at an alarming rate overseas, as lower environmental standards and working conditions in China, India, Kenya and elsewhere have led to an exponential influx of e-waste, often entering through illegal channels. The majority of e-waste ends up being broken down by ill-equipped laborers working under hazardous conditions.

A typical router or switch may contain more than 2 percent lead by weight and up to 38 separate chemical elements.

Solutions

After many delays, The European Union’s Waste Electrical and Electronic Equipment (WEEE) regulations governing the safe disposal of IT equipment were finally passed into law. The new legislation went into effect July 1st, 2007.

Under the new law, electrical and electronic producers, rebranders and importers must pay for the responsible disposal and recycling of their goods. The first of its kind, but certainly not the last, the WEEE directive is setting the stage for future legislation. Similar regulations are now being considered in the United States, as Congress debates a number of e-waste solutions.

In 2005, members of Congress formed an “e-waste working group,” hoping to jump-start a federal recycling system. The head of that group, Rep. Mike Thompson (D-Calif.), proposed a bill called the National Computer Recycling Act, requiring a fee assessment for retail sales of certain electronic devices to help fund a national recycling program. The bill is still under review.

In the interim, thirteen states have agreed to e-waste laws, including California, Washington, Maine, and Minnesota. Support among other states is growing, in addition to new research initiatives. In September 2007, the Green Chemistry Research and Development Act was proposed, looking to authorize $165 million over three years for research into products that reduce or eliminate hazardous waste. This bill also awaits a Senate vote.

While e-waste awareness has finally attracted government attention, the simplest solution is often the most easily overlooked - prevention. Reuse has become a focal point in the effort to combat e-waste, primarily in the consumer space where organizations are spearheading change well ahead of legislation. Many electronic consumer manufacturers, including Apple, Dell, HP, and Sony have recently established trade-in and recycling programs.

Garner estimates one in every dozen computers used worldwide is a “secondary computer,” and nearly 152.5 million used systems are shipped annually. The research firm predicts that both the home and professional markets for secondary PC’s will continue to see growth in the next several years, fueled by better performance, longer system life and recycling legislation that would give companies greater incentives for reuse and recycling.

Buying pre-owned hardware is not only a cost effective way to reduce IT costs, it is also perfectly aligned with e-waste reduction. Organizations of all kinds can benefit from reuse, in ways that tangibly affect the bottom line and intangibly help save the environment.

Gartner estimates the energy from manufacturing, distribution and use of information and communications technology emits approximately 2 percent of total global carbon dioxide, equal to the emissions from the entire airline industry.

-- Gartner analyst Simon Mingay
Gartner Symposium/ITxpo

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About UsedCisco.com

Founded in 2005, UsedCisco.com is the world’s largest online network hardware outlet, offering thousands of network hardware products at significant savings off list price. Our inventory includes the most popular Cisco switches, routers, firewalls, VoIP and wireless products, as well as thousands of hard-to-find modules, memory and cables. Each unit is fully tested and certified as functionally new and carries a free, two-year warranty.

While green initiatives have only recently gained popular favor, Reuse & Green Your Network™ have been our mainstay ideals since inception. UsedCisco.com is a fully committed environmentally-conscious operation, from energy saving light bulbs in our offices to every order’s recycled packaging. Our entire business lies on the concept of reuse and a mass reduction of e-waste. By supporting us, you are a real and active part of the solution.

The UsedCisco.com advantage

• Certified genuine products - Every item comes from a working environment, verified with the original proof of ownership directly from Cisco. We have a zero tolerance policy for asset recovery via eBay, auction sites and offshore vendors
• Competitive pricing - Our prices are updated frequently and reflect current market conditions
• You’re always covered - free, two-year warranty is included with every purchase, as well as an optional three year warranty extension.
• Fast, professional and reliable delivery
• Environmentally friendly solution to your network hardware needs
• Easy payment solutions - we accept all major credit cards, PayPal and wire transfer. Credit terms available for government, educational and non-profit institutions.
• Fast and reliable website - we host with Engine Yard, one of the best in the business.
• We take security seriously! - We are Network Solutions EV SSL secured, and never store customer payment information. Repeat customers get a bit annoyed when asked to provide their payment information, but are happy to offer it again as we explain our extra level of precaution.
• Clear pricing - Pricing for available items are clearly posted. No hidden fees or additional costs. Please note our prices are updated daily, sometimes hourly, to reflect market conditions, so check back often.
• International shipping - a growing demand has prompted us to ship beyond our borders. Feel safe knowing every package is insured, and contact us if you need to set up special shipping arrangements.

Every unit we stock is Certified Pre-Owned, undergoing a grueling 28-point testing and upgrading process.

Electronics, connectivity ports, memory configuration, firmware, and cosmetic condition are all carefully tested, upgraded and corrected. Our success stems from this meticulous process, and we are proud to have one of the lowest RMA rates in the industry. Don’t take our word for it - read a handful of our testimonials and browse a sample of our growing customer below.

28-point quality control checklist



• Inspect and disassemble chassis
• Clean chassis, paint if necessary
• Inspect and clean motherboard
• Test motherboard
• Test power supply
• Test fan assembly
• Test fan noise level
• Remove and clean interface cards
• Test interface cards
• Inspect interface cards for bent pins
• Record all memory - Flash, DRAM, VRAM, shared
• Remove and clean memory
• Test memory
• Test power on/off switch
• Test power connectivity
• Test indicator lights
• Test ports
• Run System Test 1 to ensure no errors
• Run configurator to determine hardware/software compatibility
• Check firmware, upgrade if necessary
• Check software versions, upgrade if necessary
• Run System Test 2 to ensure no errors
• Reassemble, boot and stress test unit
• Record unit serial number and test results
• Compare packing slip with customer order for accuracy
• Custom pack all components with fitted foam
• Notify customer via email with the shipment tracking information
• Generate feedback survey

Our growing customer base



• National Weather Service
• American Red Cross
• US Dept of Commerce
• Dupont
• Sysco
• BNP Paribas
• Sylvania
• Lockheed Martin
• Susan G. Komen for the Cure
• K. Hovnanian
• Level 3 Communications
• Johnson Controls
• Kodak Theater
• Butler Memorial Hospital
• Car Toys, Inc.
• USDA
• Ceradyne
• DDB Seattle
• USS Fitzgerald
• Roehl Transport
• Limewire
• DOT Ohio
• Praxair
• First United Methodist Church
• Forsythe Solutions Group
• Georgia-Pacific
• Novatel
• ZANTAZ
• Icarus Studios
• Premier Bank
• Ready Mix USA
• Indianapolis Zoo
• Institute For Astronomy
• NIST
• TRW Automotive
• Van Buren School District
• Citizens Memorial Healthcare
• City & County of Honolulu

Contact Us

www.usedcisco.com
sales@usedcisco.com

Toll-free : (800) 504-7199
Main line: (201) 526-9500

International : +01 (201) 526.9500

239 Washington Street
4th Floor
Jersey City, NJ 07302 USA

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Appendix

References

• Saving in the secondary market (IT PROCUREMENT)
  http://www.accessmylibrary.com/coms2/summary_0286-32892140_ITM
• Information Week Used Gear Experiences Survey of 628 IT professionals
  http://www.informationweek.com/galleries/showImage.jhtml?galleryID=51&imageID=4&articleID=200900735
• Counterfeit Fake Cisco Guide - WIC-1DSU-T1
  http://www.andovercg.com/services/cisco-counterfeit-wic-1dsu-t1-v2.shtml
• Counterfeit Cisco gear threatens network security
  http://www.computerweekly.com/Articles/2008/03/04/229675/counterfeit-cisco-gear-threatens-network-security.htm
• Procurement Strategies: Good Stuff Cheap
  http://www.cio.com/article/31432
• US, Canada seize counterfeit Cisco hardware made in China
  http://www.forbes.com/afxnewslimited/feeds/afx/2008/02/29/afx4713237.html
• Managing the Risks of Counterfeiting in the Information Technology Industry
  http://www.agmaglobal.org/press_events/press_docs/Counterfeit_WhitePaper_Final.pdf
• Cash From Waste
  http://www.my-esm.com/showArticle.jhtml;jsessionid=S2KGG23P3ZROUQSNDLRCKHSCJUNN2JVN?articleID=197008176
• What You Need To Know When Buying Used Hardware
  http://www.americanchronicle.com/articles/17664
• Video Killed The Beautiful View
  http://ezinearticles.com/?Video-Killed-the-Beautiful-View&id=421241
• Politicos ponder new action against e-waste
  http://www.news.com/8301-11128_3-9932462-54.html?tag=ne.fd.mnbc
• Green Technology Group Launched for U.K. IT Managers
  http://www.cio.com/article/107103/Green_Technology_Group_Launched_for_U.K._IT_Managers

Glossary

• Asset recovery - process of purchasing hardware from working environments for re-certification and resale.
• Certified Pre-Owned – a testing certification seal for genuine, pre-owned networking hardware. All inventory is pulled directly from working environments and undergoes a rigourous formal testing procedure.
• Cisco Authorized Refurbished – Equipment according to Cisco’s CARP standards.
• DOA (dead on arrival) – goods that do not work properly or fail to turn on after shipping.
• Gray market – goods or products imported from another region where they are offered by the manufacturer for less than in the reseller’s region.
• Off-lease equipment – hardware resold after a lessee returns it.
• Two-year warranty – period in which seller replaces any failed or malfunctioning hardware. While turnaround times vary among sellers, next day replacement is the current industry standard.
• NIB (New in box) – condition same as if it came direct from the manufacturer.
• NOB (New open box) – box has been opened. Nearly the same as NIB. Seller should state if inner static bag has been opened to test. All accessories and packaging are there as if it had been purchased new.
• Next day hardware replacement – situation in which seller sends the customer a replacement unit before receipt of returned goods. This speeds up the process of RMA replacement and provides the fastest method of post-sales problem resolution.
• Refurbished or refurb – restored to good cosmetic and working condition
• Trade-in programs – programs allowing buyers to exchange their current equipment for newer models.
• Pre-owned hardware – general term for secondary hardware.
• Secondary market – reputable resellers who purchase, refurbish, reset and resell equipment through asset recovery channels, along with generous warranty periods.

Last updated : June, 2009