Buying Industrial-Strength Tech on the Cheap

How do you run an IT department on a tight budget? Two words: Linux and eBay.


Five years ago, if you had proposed running some of your company’s most critical applications on an operating system originally developed by a longhaired Finnish teenager and given away for free, your IT manager would have laughed you out of his office. That has changed, though, as Linux has become more versatile and powerful (though it’s still cheap). In fact, a new version of Linux is suitable for just about anything your company wants to throw at it.

For the past few years, Linux has been used mostly in Web servers, where it became popular because it’s inexpensive, stable, and easily customized. Most companies have multiple Web servers — sometimes dozens, sometimes even hundreds — linked up in server farms, and that has made the low cost of Linux even more attractive. If one of those servers goes down, you still have dozens of replacements standing by. That kind of redundancy is a lot harder to achieve with expensive Sun Solaris servers or IBM RS/6000 minicomputers.

In the IT hierarchy, though, Web servers are an oddball niche — the domain of effete, trendy techies who wear tiny glasses and big, chunky shoes. For really serious computer systems — the ones companies use to run central business applications like database management and transaction processing — most companies have stuck with big, tough, brand-name Unix computers from Compaq, IBM, and Sun.

That, too, is starting to change, however. Search site Google runs its entire operation on a gigantic farm of 10,000 highly customized Linux computers. Amazon.com reported last fall that it had cut its technology expenses 25 percent, from $71 million to $54 million, in large part by switching from Sun servers to Linux-based systems supplied by Hewlett-Packard. On Wall Street, Merrill Lynch and Credit Suisse First Boston have both started to use Linux throughout their operations, for such high-powered tasks as financial trading and order processing.

Last month, Linux vendor Red Hat (which supplies the operating systems used by the above companies) announced a version of Linux tailored for use in high-end “enterprise” applications. “One of the problems we had in the past was we sort of had a one-size-fits-all approach,” says Paul Cormier, executive vice president for engineering at Red Hat. “We had one distribution aimed at everyone from the kid in the dorm all the way up to the enterprise customer.” Red Hat’s new Linux Advanced Server adds a number of features — such as reliability, scalability, and management tools — that corporations need to run big servers. For instance, the new operating system supports “clustering” (joining together two or more servers so they act as a single unit), which is essential for creating fail-safe systems. It also has enhancements under the hood that help process heavy computing and communications chores with greater ease.

Red Hat worked closely with Oracle to make sure that this version of Linux meshed well with Oracle’s database and application servers, so it’s a good bet that this operating system will find a home among Oracle users. Red Hat’s Linux Advanced Server costs $800 or more per machine — significantly less than Solaris or Windows 2000. (Of course, you also have to buy the hardware that runs the operating system.) Red Hat continues to offer a cheaper, low-end version of Linux — and you can still download Linux and set it up yourself for free, if you want.

eBay for the Enterprise

If last decade’s IT managers found Linux funny, just imagine how they might have reacted to the notion of buying hardware on eBay — the land of Pez dispensers, Beanie Babies, and useless attic junk. But last quarter, eBay sold $650 million in high-tech products (everything from stereos to servers), and the fastest-growing segment within those sales was networking and telecommunications equipment. At any given moment, says Sergio Monsalve, general manager of eBay’s networking and telecom category, the auction site has about 25,000 such products on the block, including servers, storage systems, high-end Cisco routers, and the like.

Some of these items are overstock that’s being sold by resellers or businesses liquidating their assets in the wake of bankruptcy. But several computer vendors — including Dell, IBM, and Sun — have started selling their products directly on eBay, often with warranties and support included. It’s a good way to get rid of overstock or last year’s models, Monsalve says, because eBay buyers are typically looking for bargains (not necessarily the latest and greatest) — even when they’re buying equipment for corporate networks.

Bargain hunting can pay off. Online lender E-Loan managed to cut IT costs by 11 percent, partly by purchasing items through eBay, including a nearly new Sun E4500 server. The machine would have cost $60,000 new; E-Loan got it for $20,000. On a more personal note, I recently found a new IBM RS/6000 server on eBay for $3,500. Although that particular model was discontinued by IBM in 2000, comparable systems now cost $15,000 or more. At that price, I may buy two (once I clear out some garage space in which to put the things).

Because warranties and support are important to most companies, Monsalve advises would-be purchasers to carefully read item descriptions for warranty details before placing bids. As with everything on eBay, the rule of caveat emptor applies.

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Buying Industrial-Strength Tech on the Cheap