The Secondary Market: What is it? How do I use it?

by Jim Leslie, Lead Telecom Analyst, St. John Medical Center, Tulsa, Oklahoma

Newer ISLUA (International SL-1 Users Association) members may wonder just what is the independent secondary market (ISM)? How can I buy from the ISM? I will give a brief overview of the secondary market and list a few issues that should be considered by end users purchasing from secondary market vendors.

The "secondary market" is comprised of vendors that can described as "Independent Secondary Market Vendors" or ISMVs. These are companies that purchase used and surplus equipment from end users, leasing companies and Nortel Authorized Distributors (AD). Some ISVMs are brokers that have little or no inventory and offer no installation, repair or maintenance services. Other ISVMs offer the same services as Nortel Ads except that ISVMs cannot provide Nortel Software Licensing or Key Code services. Several ISMVs have the capability to perform component level repair of circuit cards and telephone sets.

How does an end user go about purchasing from the secondary market? Where does the user find ISVMs? What are the important issues related to the use of used equipment in systems? Can users buy complete used systems?

If you are under a service contract with a Nortel AD, you should check the contract for language that controls and/or limits your right purchase Nortel equipment from sources other than the contract vendor. You could ask your vendor to amend the contract before the end of the contract period if you want to start purchasing from the secondary market before the end of your current contract. Be sure to look for such restrictions in any future service contracts and negotiate changes before signing. The biggest "real" issue for both parties is agreeing on who is responsible for warranty coverage of equipment obtained from sources other than the service contract vendor. More on this subject later. If your current vendor will not agree to continue your contract if you purchase from another vendor, ask your vendor to quote remanufactured and/or used equipment. Nortel has a remanufactured equipment program called Second To None that can provide some cost savings from new equipment prices.

If you are a Customer Owned And Maintained System (COAMS) user or don't have a service contract (a time and materials customer of a Nortel AD), you should not have any problems from a support standpoint. COAMS users, by definition, have in-house technical staff to perform service and maintenance so there would not be any contractual issues with use of secondary market equipment.

If you want to purchase secondary market equipment, you need to know that the Revision Level of the card, assembly and/or set may need to be at a certain minimum Rev. Level in order to function properly with your existing system. A good ISVM should be able to determine any minimum Revision Level requirements for you based on the current software release of your system. You may also find this information at the Nortel Information Center site on the Product Bulletin page. The Nortel Practices that come with your system and with software upgrades has a section called "Product Compatibility" (553-3001-156). This document is also on the Meridian Electronic Reference Library (MERL) CD-ROM.

Warranty Repair Responsibilities

The effort required to deal with warranty issues depends on the type of maintenance service you have on your system(s). In general, there are four different kinds:

No service contract and/or COAMS - You are paying for repair service on a time and materials basis or your company supports your systems in-house so there should be no issue with buying equipment from the secondary market.

Labor only service contract - You pay in advance for the labor but are paying for parts as they are replaced so there should be no issue with using secondary market parts. You will be responsible for dealing with the third party vendor on warranty replacement issues.

Parts and labor service contract on a call out basis - You are paying for the labor in advance so you should expect the vendor to replace any failed component covered under the contract regardless of source. Make sure that your contract doesn't exclude replacement of components obtained from third party sources. In any case, you will be responsible for obtaining warranty replacement from the vendor from whom you purchased the failed component and paying the service provider for the replacement part if you did not have a spare. (Remember that spares are insurance!)

Parts and labor service contract with full or part-time on-site tech - Again you are already paying for a tech to be on site so you should expect the tech to replace a third party component with your spare under the contract.

You can avoid problems with your distributor by clearly identifying equipment purchased from third party sources and not asking your distributor to honor another vendor's warranty. Many ISMVs label equipment that they sell with their own serial numbers and warranty expiration dates.

You can purchase complete phone systems from an ISMV but a Nortel AD has to transfer the System Serial Number and Software Right to Use License from the previous end user company to your company. If you plan to purchase a service contract on the used system, the Nortel AD will perform an installation audit on the system to insure that it is installed to Nortel's standards. Several ISMVs partner with Nortel ADs for installation and support services. Remember that you must always have a Nortel AD as your Software Distributor; otherwise, you can't purchase software upgrades nor obtain Nortel CTS (ETAS) services.

The variety of equipment that you can obtain from the ISM is diminishing as Nortel continues the shift to the use of key coding and shifting equipment costs from the hardware to the software "Right to Use" (RTU) fees. Meridian Mail is a prime example. The cost of an 8 port MM card accounts for only about 30% of the total cost of adding 8 ports to your MM system, so you save 30% on the card from an ISMV. You still have to find a Nortel AD willing to sell you the Key Code (RTU) to make the system recognize the card. In the end, you may save 9% over buying the complete upgrade from the AD plus the extra effort. The new MIRAN card requires a key code. Key codes are implemented on all Meridian 1 switches for software option and incremental software level control beginning with RLS 23. Watch for further developments.

This article is from the International Nortel Networks Meridian Users Group (INNMUG) web site (www.innmug.org/information/geninfo2.html#market). The article first appeared in the INNMUG newspaper, Inn Touch. The International Nortel Networks Meridian Users Group (formerly ISLUA) is "The primary resource to which Nortel Networks users worldwide turn for education, product knowledge, and professional contacts." For more information about INNMUG please call 972-680-2701, 972-680-1312 (Fax), visit www.innmug.org or email info@innmug.org