IT managers turn To eBay to cut costs

Trapped in budgetary handcuffs, IT managers are increasingly turning to an unlikely source in an effort to find bargain-priced networking equipment: eBay.

As evidence of the San Jose-based company’s rapid rise to prominence in the market for used routers, switches and other devices, eBay Inc. president Maynard Webb will be one of the keynote speakers at this week’s Networld+Interop conference in Las Vegas. This will be eBay’s first appearance at N+I, but Todd Lutwak, director of the company’s IT marketplace, said eBay plans to become a regular attendee of the show from now on.

Lutwak said eBay expects to sell more than US$1 billion worth of IT products this year. And networking gear is becoming a big draw for users: Gross merchandise sales of networking devices through the company’s Web site jumped 141 per cent last year, Lutwak said.

Etienne Handman, chief technology officer at Dublin, Calif.-based online loan company E-Loan Inc., said he turned heavily to secondary equipment markets last year to contain costs and scored big on his eBay purchases. “When we crunched the numbers for 2001, we averaged [paying] 21 cents on the dollar for the stuff we bought on eBay,” he said.

The networking products Handman purchased via eBay included routers and switches made by Cisco Systems Inc. and 3Com Corp., plus firewall software developed by Check Point Software Technologies Ltd. and installed on Sun Microsystems Inc. servers.

EBay “has done wonders for the used-equipment market,” said Zeus Kerravala, an analyst at The Yankee Group in Boston. “They’ve become one of the largest network equipment distributors out there in a short [period of] time.”

Kerravala noted that eBay and other used-equipment outlets such as Micro Warehouse Inc. in Norwalk, Conn., have cut prices on network equipment to just a few percentage points above wholesale levels.

Some networking vendors have even begun to sell new and refurbished products through eBay’s site. In February, for example, Santa Clara, Calif.-based Netgear Inc. debuted its latest wireless LAN product on the eBay exchange.

But Bill Flanagan, an analyst at Burton Group Inc. in Sterling, Va., said eBay still has a long way to go before it can become an established supplier to most large IT departments that have strong business relationships with vendors.

“If you rely too much on auctions, your costs aren’t predictable, and your supply definitely isn’t predictable, and that probably isn’t going to appeal to major enterprises,” Flanagan said.

Handman said all the equipment he has bought via eBay has been name-brand and he only once received damaged goods, which were covered by the seller’s insurance policy.