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The Gray Market Fallout
One of the most frustrating aspects of the supply chain crisis for solution providers was that the very products they were desperately seeking to meet customer commitments were showing up on the gray market from unauthorized Cisco suppliers seeking premium prices for the scarce products.
Bob Venero, CEO of Future Tech Enterprise, a Holbrook, N.Y., solution provider and Cisco partner, said plenty of competitors had turned to gray market suppliers like Network Hardware Resale.
“We’re losing deals to gray market providers,” Venero said in a June interview. “The gray market offers better availability.”
No question about it, agreed Mike Sheldon, CEO of Network Hardware Resale, who said business has boomed throughout the past year. “Obviously the constraints are with Cisco’s latest and greatest stuff, because that’s what they sell,” Sheldon said. “We’ve seen tremendous demand for all of those, and in some cases, they’ve been selling for over list price. This is the first time I’ve ever seen that since I came here in 2001.”
The ASAs, the lower-end routers and switches (Catalyst 1900, Catalyst 2960S and Xes), some of the 7604 chassis and plenty of the Nexus switch lines were among the most demanded Cisco lines, Sheldon said, with the ASAs “by far the hottest.” Buyers came to him, Sheldon said, noting that when ASA 5505, 5510 and 5520 appliances were at their worst, “I had 12 in stock.”
“Our business is to have what people need. You have to have a plate glass to break in case of emergency,” Sheldon said. “This time it’s happened with supply chain constraints, and projects and jobs could be at risk. We’ve seen bigger companies that maybe wouldn’t have talked to us five years ago buying from us now.” Sheldon said there has been a shift away from Cisco dominance in the market.
“That bias? That no one ever gets fired for buying Cisco? That’s very slowly ebbing,” Sheldon said. “At the end of the day, at least for now, a lot of these customers have a Cisco network, and if you’re human, you’re adding more Cisco stuff. HP is winning often when the customer’s doing a big rip and upgrade, but absent of that, it’s still a real hard battle with Cisco.”
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