Cisco fights fakes via used-equipment remarketing

Cisco combats market for fake switches, routers through used-equipment remarketing process.

Due to its dominance and ubiquity, Cisco is victimized by counterfeit equipment more than any other network products vendor.

Take a slideshow tour of Cisco Capital Remarketing’s facilities.

The company is taking strong measures to counter counterfeiters, such as by educating suppliers and distributors and establishing international investigative teams to hunt them down. But another, less obvious weapon in the vendor’s anticounterfeit arsenal is Cisco’s remarketing operations.

While not a direct combatant against the counterfeiting foe, Cisco Capital Remarketing nonetheless plays a valuable support role for the vendor in its fight against fakery. 

Cisco pitches its remarketing arm as a lower-priced alternative for purchasing Cisco switches, routers and other equipment, and as a trusted counterpart to used equipment brokers. Cisco’s remarketing operations, a business unit within Cisco Capital since 2000, also helps the company protect its intellectual property.

“We are a competitive and trusted alternative when buying new Cisco equipment is not an option,” says Benson Chan, senior manager of worldwide business development for Cisco Capital Remarketing.

Cisco officials would not break out revenue generated from remarketed equipment vs. new products. But the company resold 410,000 units last year, they say.

Cisco usually offers used equipment at 25% off the list price of new gear but with the same warranty. Equipment ships in 24 hours direct to the user or to 40,000 authorized resellers.

Brokers often undercut this price, Cisco admits, but it’s rarely a deal since the product has not undergone Cisco inspection, software updating or certification, Chan says.

So buyer beware.

“We won’t allow it to go into [Cisco’s] SMARTNet [maintenance program] unless Cisco inspects it,” he says.

That’s par for the course for any vendor, analysts say. (Read about how Nortel, Extreme and Foundry are fighting fakes.)

“Recertification is critical if [customers] want to put the equipment back under contract,” says Steve Schuchart of Current Analysis.

Schuchart, a former network architect at a $2.2 billion retailer in the Midwest, says he always bought network equipment new or “unmanaged” — easily discarded if it’s no longer working or required.

For network professionals considering used Cisco gear, Chan says that only Cisco has access to the hardware and software revision history of a product. Cisco maintains a database of engineering change orders (ECO) a Cisco product goes through during its life cycle.

Indeed, if a used Cisco product that’s in seemingly workable condition fails in a network — as was the case recently at a bank — it may be because it is a counterfeit or wasn’t checked against the ECO database and is not up to date on software or hardware revisions, Cisco says.

“I’m amazed at how many of our products fail or need to be revised” when they arrive at Cisco Capital Remarketing, says Senior Director Frank Atter. “So we can’t put them back on the market. It’s a significant amount of risk.”

Finding fake Cisco gear

Counterfeit products (mostly low-end switches and routers) do turn up during the Cisco remarketing inspection, the company says. Once Cisco identifies a counterfeit product through a screening process the company declined to detail, it is turned over to Cisco’s Brand Protection department, and law enforcement authorities are notified.

“It’s a very elaborate process, an aggressive approach” to counterfeit screening, notification and logging, Atter says.

The process starts early in the cycle of product receipt. Cisco obtains products for remarketing from end-of-lease agreements, trade-in programs, returned merchandise, unopened stock rotation from distributors and resellers, and Cisco manufacturing overstock. The company then checks equipment into its ISO 9001 and 14001 certified remanufacturing facilities, where quantities are validated and all items are scanned into an automated inventory-tracking system, which logs every step of the remanufacturing process.

From there, Cisco performs its prescreening unit inspection for damage, serial number verification and application of proprietary Cisco data to detect counterfeits. Any rejected items that cannot be repaired are disposed of through an “eco-friendly” component-recycling process using certified recycling vendors, in accordance with Restriction of Hazardous Substance (ROHS) regulations, Cisco officials say.

Units that pass ROHS compliance — as well as those destined for the European Union — are then fitted with ROHS-compliant replacement parts from approved vendors.

ROHS compliance is a telling indicator of whether a Cisco product is authentic or not, Cisco officials say. The secondary market is either not privy to or ignorant of these guidelines, nor do they have access to ROHS-compliant replacement parts, they claim.

“There’s not an easy way for brokers to know what is and isn’t ROHS compliant,” Chan says. “We don’t want to be seen as a dumping ground of e-waste.”

Adds Atter, “At some point, somebody’s going to get caught doing this and it’s going to be a big embarrassment.”

Prescreening is when counterfeit gear is separated from the pack. Authentic products then go on to the ECO step.

After products are updated with firmware and hardware upgrades, they undergo a set of functional, system and burn-in tests at ambient, hot and cold temperatures. A Cisco automated-testing tool downloads firmware and IOS software images, logs test results and verifies passing status of every test step.

During the test period, any previous configuration and owner information on each unit is removed, and the unit is returned to its default settings. Also, original software is erased, and a licensed and current shippable release of IOS software is installed.

Each unit then undergoes a final system test and debugging, and a final quality inspection before receiving a Cisco Certified Refurbished Equipment seal. They are then packaged up, prepared for shipment and placed on a pallet before undergoing a final “out of box audit.”

During this audit, samples of units are opened from an already packaged box to verify compliance of product contents, accessory kits, documentation and box labels. If a single unit fails this audit, the entire lot — that day’s production run for that particular product — is pulled and run through the entire process again.

Any Cisco product that does not carry the Cisco Certified Refurbished Equipment seal — whether from an authorized reseller or not — should be considered cautiously, Cisco officials say.

“Their certifications are only as good as what they have: visual,” says Scott Ravel, senior manager of worldwide remanufacturing for Cisco Capital Remarketing.

In defense of brokers

Visual inspection isn’t the only criteria in certifying used equipment, according to the United Network Equipment Dealers Association (UNEDA), a group with which Cisco has an ongoing standoff. UNEDA’s 350-plus members, who offer Cisco equipment at up to 50% off list price, must abide by a strict code of ethics stipulating they have followed a set of standard procedures to authenticate used equipment, a UNEDA spokeswoman says.

They must confirm that all equipment has the valid and original Cisco serial-number sticker affixed in its standard location, and it must match the internal serial number where applicable, she says. They also screen the equipment for counterfeits by examining labels, holograms, solder points and other identifiable characteristics.

“Since these characteristics vary by vendor, UNEDA is creating a database of photos and other tips for spotting fakes as part of its Counterfeit Task Force initiative,” she says.

UNEDA reseller Network Hardware Resale (NHR), for example, has trained technicians to test individual units to ensure “like-new” performance. Units are powered on, and internal diagnostics run through the manufacturer’s operating system. Output is logged for reference; memory, software version and hardware revision are logged; each port or slot is tested under load; and optical ports are loop-back tested and tested with a light meter to verify decibel ranges.

NHR technicians also verify configurations and compatibility; assemble equipment to customer specification, and then synchronize and retest the fully configured system. Software upgrades are preloaded if the customer acquires the license from the manufacturer — NHR does not sell software licenses.

Testing output is then captured for post-sale support purposes, NHR says. NHR says it can complete the entire process in three hours for same-day shipping.

Additional UNEDA counterfeit measures include working with law enforcement agencies and some manufacturers to identify illegal traffickers. Any UNEDA member caught dealing in stolen or counterfeit products faces sanctions, including permanent expulsion from the organization, the spokeswoman says.

In the past 12 months, the organization has expelled three members for violation of its code of ethics, she says.

Despite this process, Cisco maintains that no one can fully verify the authenticity of Cisco gear better than Cisco.

The secondary market “couldn’t even come close” to putting its gear through the certification testing process that Cisco does, Atter claims. “It’s impossible.”