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Online auctions can save hardware bucks

Published on May 20, 2002
on TechRepublic.Com

Last year, PlanMember Services, a retirement and investment accounts firm, was experiencing the same fiscal restraints most other companies reported. More than 80 percent of TechRepublic members surveyed at the time were facing significant budget cuts that were not only scuttling projects and staffing plans, but were also affecting mission-critical hardware upgrades and replacements.

Yet, using maverick creativity, a PlanMember tech leader still managed to find great deals for needed hardware in one of the most unusual places: the world of online auctions. And while he scored some great deals-saving as much as 70 percent on some items-and brought the new purchase approach into other business units, he also learned some fast lessons on how to avoid potential problems.

Going where the deals are

When the Carpinteria, CA, company's technology budget shrank dramatically last year, Toby Raggsdale, director of networking and telecomm, decided there was nothing to lose in checking out hardware deals on Internet auction sites such as eBay, Yahoo, and uBid. Online auctions had caught on big time with consumers in the past year, so the tech leader realized that they could bode well for commercial enterprises as well.

Looking to buy servers, Raggsdale first approached his traditional vendor for a price quote for four Compaq DL 380 servers. The cost, without drives, was $4,850 each, and while he didn't think the prices were horrible, Raggsdale wanted to see what price he could get from an online auction site. He was able to locate the servers at online-auction prices between $1,400 and $1,600 each.

"Even with dramatic price cuts from the vendor, I was still saving dramatic amounts on my core servers [buying from auction]," he said.

It's just one example of how the tech leader has purchased hardware via auction sites at enormous savings compared to vendors' best prices.

Auction items can be surprisingly good

Yet, Raggsdale quickly pointed out that not everything up for auction is a bargain. That's especially true for consumer computing equipment, he said, as the presence of more bidders typically means that a higher price will prevail.

Instead, Raggsdale recommends that tech leaders stick to more specialized hardware when checking out auction equipment-but you have to know what you're looking for.

"The guys on eBay aren't going to spend a lot of time hand-holding and helping you out [with product selection]," explained Raggsdale. Buyers unfamiliar with the idiosyncrasies of hardware selection can easily end up with something they don't need, he added.

However, as his experience has proven, it's not hard to score a deal-as well as a few pleasant surprises. For instance, Raggsdale won the bid on a used DL380 server "that was a little battered looking" when he unpacked it. But despite its appearance, the server still worked, and Raggsdale discovered a bonus-the previous owners had inadvertently included the extra power supply (worth $465) and an additional 256 MB of memory.

Raggsdale's successes with auction purchases have now spread to other business units. For example, the acquisition department was considering a $700-per-month lease on a Neoport S170, a hi-tech folding machine used in the production of paper-based marketing materials and brochures. Raggsdale scored the same obscure piece of hardware on eBay, slightly used, for just $2,000-transforming what could have been an expensive lease, and thus a liability, into a corporate asset.

Accounts payable can be a sticking point

From hardware to folding machines, all of Raggsdale's auction transactions have gone very smoothly, although he did have to overcome a slight internal corporate hurdle, he explained. It isn't easy to convince an accounting department to do business with an unknown company or individual-especially when it's a virtual purchase.

Most eBay sellers prefer to be paid via PayPal, a transactional middleman that sets up merchant accounts for sellers and allows buyers to pay by credit card. Leary of giving a credit card number to an unknown party, PlanMember's accounting department was not eager to provide the corporate American Express card for an online auction purchase.

So Raggsdale convinced the accounts payable unit to cut a corporate check, which then had to clear the seller's bank before the seller would ship the goods.

While the tech leader admits that he was a bit nervous the first time he bought through an auction— he realized that the goods might not arrive or arrive in the described shape— his apprehension waned after the first few successful purchases.

"After the first [purchase] came in so successfully, the later ones came in easier and easier. We're continuing to go forward with purchases, as I haven't seen anything to scare me off yet," he said. In fact, the new purchase approach is going so well that by this fall, Raggsdale plans to auction off some of PlanMember Services' hardware online.

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david southgate
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