Cisco looking to counter used-gear competitors

Channel partner programs to combat used gear, and stepped up controls over support and software are part of the plan.

Call Cisco a victim of its own success; as its dominance in corporate routing and switching grows, so goes the vigorous aftermarket for Cisco gear -- a subsegment that's reached a point the vendor can no longer ignore.

Used gear or "gray market" competition is among several issues in Cisco's sights, as it kicks off its annual Partner Summit in Las Vegas this week. Cisco says aftermarket numbers make a visible dent in its equipment revenue. It estimates that gray-market sales take $200 million to $300 million in revenue away from Cisco -- about 7% of its total switch and router revenue in its last fiscal year.

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Call Cisco a victim of its own success; as its dominance in corporate routing and switching grows, so goes the vigorous aftermarket for Cisco gear -- a subsegment that's reached a point the vendor can no longer ignore.

Used gear or "gray market" competition is among several issues in Cisco's sights, as it kicks off its annual Partner Summit in Las Vegas this week. Cisco says aftermarket numbers make a visible dent in its equipment revenue. It estimates that gray-market sales take $200 million to $300 million in revenue away from Cisco -- about 7% of its total switch and router revenue in its last fiscal year.

"The largest used equipment broker in North America has over 50 account managers calling on [Cisco] customers in [the] U.S. [and] did $140 million in sales in calendar year 2006," says a statement on the Partner Summit section of Cisco's Web site. Aftermarket Cisco brokers "have penetrated the government channels and have been on the GSA schedule . . . [and] are effectively selling against Cisco in the Government space."

Cisco says used-gear brokers are winning on the small side of the SMB market - a nut Cisco has tried, unsuccessfully, to crack many times before.

"Cisco does not have an effective offering in the sub-100 market space," the company adds, "and our competitors [including aftermarket brokers], are doing well there."