When is a refurbished server not refurbished? Ask this Dell reseller

Sysadmin blog What's the difference between a refurbished server and a new one? The term refurbished has a negative connotation, conjuring images of open box returns and non-existent warranties, but in at least one case – Dell's ecosystem – that narrative doesn't quite fit.

xByte Technologies is a company of about 50 people based out of Florida, just south of Tampa. The company has revenues of more than $20m per year, with 20 per cent growth year over year for the past five years. And their business is selling servers officially classified as refurbished.

If $20m seems like a lot for a company selling cut-price refurbished gear, it's a bit more complicated than all that. xByte exists because of a quirk of Dell's business model that makes sense once it's all explained.

It's worth noting that Dell doesn't build servers and then just keep endless warehouses full of gear waiting for customers to buy. Dell actually uses a just-in-time delivery model that basically means servers are assembled as they are ordered.

This has a few advantages for Dell. The first is that it allows for a great deal of server customization without having to keep stock on every conceivable variation of every model. The second is that it lets Dell push at least some of the burden of keeping inventory around onto the component suppliers. Dell buys as it needs and builds as it needs.

For the most part, this works for everyone involved. There is, however, a tiny niggle of a problem. For Dell's just-in-time delivery system to work, if someone cancels an order, they still build that server. It's actually less expensive to continue building the server and selling it as a "refurb" than to try to stop their production chain at that point.

Similarly, if people receive a server and for some reason don't like it, it gets returned to Dell and ends up in the same refurbished channel. This new-but-cancelled or returned gear needs to get sold. Unfortunately for Dell, they can't sell enough refurb gear through their regular consumer channel, and this is where xByte comes in.

xByte buys gear in half-million or million-dollar lots from Dell and then resells them. Dell doesn't want just anyone doing this. They want refurbished Dell servers to be sold in such a way that they don't degrade Dell's name.

To this end, xByte and Dell have built a relationship where xByte puts out Dell quality systems and support and helps Dell maintain their brand image. In exchange, Dell has allowed xByte to sell Dell warranties with their servers. This doesn't occur elsewhere.

Beyond tin shifting

My biggest question about all of this was, why doesn't Dell simply take the place of xByte? The answer has layers, some officially recognized by both companies, some not. xByte views itself as "extending Dell's brand" and they're not wrong about that.

With Dell, everything boils down to a volume play. They're not really there to do onesies and twosies, so xByte is there to step in and handle smaller orders. xByte provides their value-add with more of a "white-glove" pre-sales and support experience, the sort of thing that matters to companies who don't buy by the shipping container.

xByte's close relationship with Dell and white-glove support are also creating an environment for small startups to get engaged with Dell. Startups are hard enough as it is, and everyone wants to partner with Dell. Getting Dell's attention can take time and effort; going through xByte can give a startup the chance to prove everything out before moving up the food chain.

One of the advantages of a refurbed box over a new one is that you'll deal with fewer delays. New Dell equipment goes through testing before it goes out the door. Refurbished equipment has been tested once by Dell at initial point of sale, once by Dell when it is returned, then again by xByte before being put on the shelf.

When you buy from xByte the servers are ready to go without another round of testing; xByte figures three thorough gos at it is probably enough. For some startups this expediency can matter.

Horses for courses

Of course, there is no escaping that "refurbished" stigma. No startup is going to explain the intricacies of Dell's ecosystem to every potential customer and try to convince them that refurbished isn't quite what they think, or somehow as good as new.

xByte can certainly sell new Dell equipment – any number of Dell channel partners can do that – but the lower prices go away with that, as does some of the alacrity of delivery.

So many computers are sold every year to so many customers that esoteric niches like this crop up all over. For used gear you can buy from outfits like Server Monkey. For semi-official refurbished gear that's like new but somehow not, you buy xByte. And if you want new, you can buy from pretty much anyone, including Dell itself.

All this and more is just part and parcel of selling gear from one company. With the purchase of EMC, I'm sure it will get even more complicated.

The fact that this is even remotely sustainable has given me a different way of looking at the sheer scale of the IT industry. It's enormous, sometimes baffling, and there's absolutely something for everyone... if you look hard enough, that is. ®