From gray to red: Why gray market IT is bad for business

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We get it – small businesses across the U.S. face tremendous pressure to solve their IT needs while spending as little money as possible. Perhaps you’ve stumbled upon a small online retailer that sells Cisco switches for lower pricing than your go-to vendors, or maybe you have a habit of replacing old laptops with low-cost merchants on Amazon.

But if you found a little-known shop with prices much lower than everyone else, odds are they’re a gray market vendor – which unfortunately entails far more than just a simple bargain.

In the short term, you get the equipment you need without breaking the bank. But in the long term, gray market IT purchases risk a lifecycle without warranties, ambiguous hardware authenticity, and unpredictable security issues.

Think of it this way – if a car dealership offered you a Maserati for the price of a Honda, your first question would be, “What’s the catch?”

Similarly, when it comes to making IT purchases, gray market vendors should raise suspicion.

Say goodbye to manufacturer warranties

A gray market purchase is done outside an OEM’s authorized channels. Consequently, the manufacturer cannot honor their typical warranties should any issues arise.

This is because neither you nor the OEM can verify whether the product is genuinely new or secretly used, nor can you confirm if it was originally designed for import to the U.S.

Should your gray market equipment need support months or years down the line, you’ll be left to your own devices – which often means replacing hardware that otherwise should have lasted years longer.

You’ll never know what you’re actually buying

Gray market vendors typically bypass MSRPs and authorized pricing by:

1. Claiming used or counterfeit hardware is new or authentic.
2. Importing goods designed for other countries without OEM permission.

This means that, while you think you’re saving money on a new computer or networking switch, what you may receive is an older model, a used unit with wear and tear, or equipment meant for another country with parts that don’t align with your infrastructure and documentation written in another language.

Say hello to obsolescence and security gaps

Because gray market hardware is often counterfeit or not intended for use in the United States, you risk deploying hardware that’s ineligible for critical security and software updates.

The result? Your “new” purchases become obsolete years before you expected them to. And the longer you use them, the less secure they become – leaving you more and more vulnerable to security breaches.

How to spot and avoid gray market IT vendors

With gray market purchases, the old mantra rings true: if a deal sounds too good to be true, it probably is.

To avoid making a gray market purchase, start by comparing the shop’s price to other, well-established vendors. While prices vary from vendor to vendor, OEMs set standard MSRPs that every shop must abide by. If a vendor lists hardware for well below that MSRP, it’s time to question their validity.

You can confirm a vendor is selling gray market hardware by evaluating their company information. Questions to ask yourself include:

• Are they an authorized reseller/dealer for the OEM(s) you want to buy?
• Can you personally verify their company headquarters?
• Do their products come with a detailed manufacturer’s warranty?
• If on Amazon, is it a first-party, “sold by Amazon” deal, or a third-party merchant?

If the answer to many of these questions is “no,” or if the Amazon merchant is an unreputable third party, it’s time to find another vendor – you’re almost certainly dealing with a gray market product.

We’ve seen the consequences firsthand

One of our small- to medium-sized business (SMB) customers recently found a third-party merchant on Amazon selling Cisco hardware for roughly $100 less per unit than their other vendors. Eager to save costs, they made the purchase, believing they had secured a great deal.

The customer proceeded to install the gray market equipment across three different sites, and, for a while, everything seemed okay. But after just 10 months, performance started to deteriorate. When they attempted to seek support from Cisco, they hit a roadblock: the product serial numbers couldn’t be verified. Frustrated and facing operational challenges, they realized the true cost of their decision.

Ultimately, the gray market gamble backfired. The SMB had to uninstall the equipment across three locations, discard them, and replace them with authentic hardware from SHI. What seemed like a cost-saving move turned out to be a very costly mistake, doubling their cost in the long-run.

Save money and stay safe with SHI Direct

At SHI, we ensure SMB organizations like yours pursue essential IT investments without compromising your budget.

SHI Direct is our dedicated ecommerce portal for SMB customers, bringing you the technology you need at a cost and timeline that works best for you.

As an authorized reseller for nearly every leading OEM across every product vertical, every purchase through SHI comes with the manufacturer’s warranty, genuine parts, and the reliably long lifecycle you expect – unlike those questionable gray market merchants.

Create an account on SHI Direct or contact us today to access affordable technology that’s tailored for SMB organizations.