October 2009

Networking Hardware Demand

More Supply than Demand

By: Kristin Masters

Telecom technology continues to bring greater functionality and adaptability to the workplace, revolutionizing the way that companies of all sizes operate and communicate. Business owners once viewed their IT expenses as simply one more (expensive) item in the budget, this perspective has changed as technology has proven a valuable asset for a company’s sustained success. Now, business owners have come to see IT expenditures as investments.

This is increasingly true for telecom equipment like network systems, switches, and routers, which play a critical role in streamlining approaches to communication and operation. The popularity of these components — both new and pre-owned — has come to significantly surpass the supply. The phenomenon of greater demand than supply for this networking hardware may appear anomalous in this slow economy. However, this market segment offers outstanding value through economical and user-friendly products that actually save businesses money over time.

The Benefits of Advanced Networking Hardware

Businesses are frequently finding that if they wish to remain competitive, they must do more than simply maintain their existing networks; they must expand them. The ability to integrate various media and devices seamlessly and wirelessly has become an indispensable asset to companies that want to achieve or maintain industry leadership. Expanded networks offer multiple means for improving both operation and communication:

  1. Increased database capacity: Companies can use databases to track everything from sales figures to networking hardware inventory. This translates into money saved on tasks that previously had to be performed manually, such as data crunching or physical inventories.
  2. Expanded access: A reliable wireless network allows access from anywhere, using not only computers, but also cell phones and PDA’s. The presence or absence of networking hardware no longer limits the viability of a connection.
  3. More advanced security needs: With the advent of open access, network security has also evolved to accommodate more sophisticated, complex networking hardware needs. Networks must offer comprehensive security options that do not hinder usability.
  4. Improved collaboration: A streamlined networking systems makes communication between individuals and departments much easier. It has been estimated that as many as 50% of businesses lose money due to inefficient communication, and proper networking hardware is the most effective way to prevent this revenue loss.
  5. Greater flexibility: Through video conferences and telecommuting, employees can meet with one another — or with customers — from virtually anywhere. As expectations about work-life balance change, these options provide employers with tools to increase employee satisfaction.
  6. Growth potential: Contemporary networking hardware and systems are broad enough to include multiple locations, regardless of proximity. This capability means that businesses’ ability to grow is no longer limited by communication or data-sharing constraints.
  7. Integration of new technology: Updated networking hardware offers the ability to incorporate cutting-edge technology. The latest tools, like VoiceOver Wireless LAN’s (VoWLAN), are growing in popularity, but require more advanced networking hardware if they are to be implemented effectively.

Increased Demand for Cisco Networking Hardware

Business owners who see these benefits have consistently sought out networking hardware solutions that offer versatility and cost effectiveness. Thus, Cisco’s Core Switching Equipment, particularly the Catalyst 7600 and 6500 Systems, has enjoyed a veritable explosion in popularity. Cisco touts these systems for their exceptional mobility, redundancy, and ease of use.

The Catalyst 7600 and 6500 Systems work with business-critical WLAN’s, so network managers and operators can administer their own networks. This in-house functionality makes these systems an economical choice for networking hardware needs in virtually any industry. Lower-level switches and routers that complement these systems have also been in high demand.

The demand, it appears, far outstrips the supply of Cisco networking hardware products. Part of the disparity comes from Cisco’s discerning evaluation of its distributors and resellers. The economic climate has left many suppliers on shaky financial ground, which makes for a tenuous supplier relationship. The company began screening its publicly traded suppliers late last year, assessing each supplier’s capital structure, asset market value, and asset volatility.

Such a fiscally conservative approach has definitively impacted Cisco’s supply chain. John O’Connor, Director of Supply-Chain Risk Management, recently told CFO magazine, “If you want to have a lean environment, but also one that is focused on resiliency, you have to acknowledge the trade-off….Sometimes what you do will run counter to your lean metrics, such as slowing down inventory turns or reducing purchasing commitments.”

Alternative Sources for Networking Hardware

The trade-off, in this case, is a shortage of new Cisco products. The lead time for new networking hardware generally runs four to twelve weeks, and the most popular networking hardware, like those Catalyst systems, is often on back order for months. The scarcity of new networking hardware has led many business owners to seek more expeditious alternatives.

Perhaps the most appealing of these options is buying refurbished networking hardware. Many companies stock pre-owned networking hardware, including Cisco core switching equipment. Joe Kearns, of Data Hardware Depot, noted the recent surge in demand for these systems. “Networks still need to be maintained and expanded, and companies are looking to get the most out of their budget,” Kearns says.

Buying pre-owned networking hardware through companies like Data Hardware Depot offers all the benefits of purchasing new networking hardware from Cisco, with several additional advantages:

  1. Short lead time: Unlike with new networking hardware, the lead time for pre-owned equipment is generally only one day. This means the network is up and running much more quickly.
  2. Reduced cost: Pre-owned networking hardware can be purchased at a substantial discount, maximizing an often-tight IT budget. Businesses can either use the discounts to save money, or take advantage of the savings and upgrade to a more robust system.
  3. Outstanding warranty: The operational integrity of every component is guaranteed, and faulty products are replaced overnight. Pre-owned networking hardware offers the same quality — with excellent value.

Business owners have scrambled to take advantage of these benefits, meaning that even pre-owned Cisco equipment can be difficult to find. At Data Hardware Depot, Kearns noted a particular shortage in core switching equipment, along with lower-level switches and routers, which echoes the nationwide trend.

The explosive demand for Cisco networking hardware products is unique in these economic conditions, but it indicates business owners’ desire to remain robust and use technology as a tool to spur growth, strengthen communication, and streamline their budgets. As connectivity gains greater importance and technology continues to evolve, the demand for these products will undoubtedly remain steady.