Answer

Gray market equipment saves money but requires due diligence

What is the difference between white, black and gray market equipment in IT?

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Just as used cars can provide suitable and reliable transportation, used servers and other hardware can also provide adequate computing capacity for a business data center. The used IT market has grown in the last decade as companies seek to reduce capital expenses and preserve legacy systems. But used computing equipment can carry risks for a business. It's important to perform some due diligence and take precautions to avoid purchasing stolen, counterfeit or defective equipment from disreputable IT equipment resellers.

To understand the used IT market, it's important for business leaders to differentiate between white, gray and black markets. The white market is basically dealing directly with the system vendor or their authorized IT equipment reseller. Going this route will get you full vendor warranties, and even more important, the service providers will have access to spare parts and support from the vendors.

Gray market equipment -- or secondary market equipment -- deals with used IT hardware. System manufacturers almost never sell used equipment. They want the premiums for the latest and greatest models. But every technology refresh cycle displaces a huge amount of gear that is actually working just fine. That used equipment is typically sold off to the secondary market, which resells the used gear for far less than what new gear would cost (even for parts). Organizations such as the Alliance for Gray Market and Counterfeit Abatement define the gray market as the "unauthorized sale of new, branded products diverted from authorized distribution channels or imported into a country for sale without the consent or knowledge of the manufacturer."

There is also a black market for IT equipment, which might deal in equipment that has been stolen or even counterfeited to look like systems from major vendors, though fake gear never performs as well as original vendors' gear. In either case, black market gear is normally facilitated by a criminal enterprise.

A challenge for the gray market is that sometimes black market goods may enter the gray market channel and wind up in the hands of buyers. This sullies the gray market's reputation.

This was first published in April 2013

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