MarkITx, a $100 million and rising online marketplace for used enterprise IT equipment continues to add hundreds of clients per month across the globe.
The exchange's diverse list of active traders include the directors of infrastructure for AARP, a Turkish bank, an Italian data center, a Canadian trading center, entities in Uganda, and a government agency in India. "There's no language barriers in hardware," says Frank Muscarello, CEO of MarkITx.
It's a $320 billion secondary market, he explains. It centers around a lot of commoditized hardware like laptops and PCs, but MarkITx deals with the "big iron" like networking infrastructure, servers, storage. "Everybody is buying from Cisco, IBM, Oracle, but everybody uses technology equally, so why not build a transparent marketplace as they migrate towards alternatives?"
A real-time secondary market helps firms to recoup maximum value from depreciated or obsolete equipment, and MarkITx claims users are able to extract 5-8 times the value of previous methods which averaged about 10 cents on the dollar. Muscarello likens MarkITx's price transparency to the market disruption of Expedia to travel, StubHub to tickets, and cars.com to the used car market.
"One of our traders called our exchange a "lease without a term" because companies can roll in and roll out of technology without a huge impact on the balance sheet," says Muscarello.
"What it comes down to is the fact that there's this seismic shift in technology in the software layer, and what you're finding is a massive change happening around software-defined networking, virtualization and VMware," says Muscarello. "And backing into that is what the internet giants -- Google, Amazon, Twitter -- are really doing around Open Compute. If that's the extreme of what they are doing, of buying non-OEM hardware, it's then further commoditizing product into one set standard."
"If the stream is Open Compute, software is changing the game of that - if you look at virtualized and software re-defined networking, it makes the switch, essentially, a white box. All these macro economic forces are causing this change and allowing things effectively to be utilized longer, which is the basis for a secondary market. If everyone adopts Open Compute hardware, the hardware becomes necessary, but irrelevant."
[For more on open source projects, read: Open Source Hardware Becoming A Reality]
Look at the perspective of what cloud providers are doing, he adds. Like utilities, the enterprise signs up for a pay-as-you-go consumption model. For users, the hardware no longer matters, just the compute ability and power consumption.
HSBC's sale of its credit card division to Capital One is a prime example of why a tier-one institution would turn to a secondary market to unload equipment and recoup value. "In that sale there were maybe 4-5 data centers in the portfolio HSBC won't utilize anymore because of redundancy. So they are on the sell-side pushing infrastructure to market," Muscarello explains. "They could come to our platform and upload the hardware in real-time in a spreadsheet or API and we tell them market value."
"We can do this because on the other side we have large cloud providers like Savvis that want to continue to utilize equipment. They sell it in a cloud offering as a utility, and that's where the demand would be coming from… So we make connections between two parties, guarantee all parts of trade, guarantee the buy-side gets what they need, and the sell-side gets value, and we hold money in escrow."
Since launching 16 months ago MarkITx has seen big opportunity around networking infrastructure in financial service verticals. Because of the way market players utilize hardware in the nano seconds to execute trades, it is important for those firms to have the latest and greatest technology. As a result, a lot of that product, which would be appropriate for another environment like a private or public cloud offering, is coming into the marketplace in a short amount of time. Becca Lipman is Senior Editor for Wall Street & Technology. She writes in-depth news articles with a focus on big data and compliance in the capital markets. She regularly meets with information technology leaders and innovators and writes about cloud computing, datacenters, ... View Full Bio