Weeks prior to the article being published, Dan presented me with the idea that I may give insight to information about used Qualcomm, PeopleNet, GeoLogic, SkyBitz, and any other system that may have a demand out on the used market. In his research, Pivot Technology Resources seemed to know a lot about this market. As the owner of a very small company competing with very influential and powerful corporations like Qualcomm and PeopleNet, I was very excited and cautious of my verbiage, phrases, information, and any biased feelings I had for any of the service providers and manufacturers. I felt that there would be a political aspect involved, being that Qualcomm and PeopleNet invest large amounts of money in both advertising and sponsorship of events for Transport Topics, but didn't think that a company that has so much value to a trucking company like Pivot Technology Resources (especially in today's economy) could be discounted as a resource on the front page of Transport Topics.
The point of this blog is to provide information that was left out, or skewed in the publication and to inform potential investors to the risks and benefits of investing in equipment on the secondary market. Let's dispel these myths and bring truth to the forefront so that companies can make better decisions about whether investing in used equipment is a good move for their fleets.
After transfer fees, programming fees, activation fees, and variable costs associated with acquiring a used piece of equipment, the cost is too close to new. There is not much of a cost-savings buying used.
Every manufacturer of mobile communications and asset tracking equipment is different in their transfer processes and procedures. For instance, PeopleNet has imposed a $350 transfer fee imposed on the buyer of any used OBC. The only explanation I could get from Garland Jackson, Vice President of PeopleNet, was "this is the price that we have come up with to account for the costs associated with the transfer of a used PeopleNet OBC." This fee doesn't give you any kind of warranty either. If you would like a new warranty for a used OBC, they will gladly have you send in the unit to their support team to test and reconfigure, and offer you a new one year warranty. This will only cost you $470 per unit. This is by far the most extreme cost for any transfer fee in the history of used equipment by any mobile communications service provider in the market. In my professional opinion, this is surely to persuade a company to buy new equipment, thus adding new units to their sales numbers.
As a past Qualcomm salesperson myself, I had used this method many times to win sales against the competition of private fleets trying to sell their used Qualcomm equipment. This was back in the days when Qualcomm had a $250 transfer fee on any used OmniTRACS system. Now, from my experience on the used equipment market, they simply impose a $25 fee to the seller and a $25 fee to the buyer. This angle makes much more sense to me as they still see a great percentage of these used systems pop back into another current customer's account with very little trouble and a very high success rate. They also see the benefits in the recurring monthly revenue associated with these systems.
This brings us back to the question of cost-savings: Is it really beneficial to a company to invest in a used PeopleNet system? Quite frankly, if seeing an average of 50% savings on used components and wiring, and an average of 40% savings on a complete used system (after accounting for all imposed fees) is beneficial, the myth will be dispelled. Note that the equipment coming from Pivot Technology Resources would be considered of high quality, tested and cleaned, and supported with a new warranty...which brings me to our next myth...
All used equipment in the market is junk. There are too many problems associated with buying used. Buying new is the only option.
There are many horror stories of companies buying equipment from eBay or at auctions. They get the equipment and find out that it was once stolen, currently dead, broken, non-transferable, dirty, of low quality, or not even the type of component that was promised. Even buying from a private fleet may get you a good deal, but when you have a failure rate as high as 80 percent, how good is the deal then? You may have actually ended up severely overpaying and then adding labor costs to test, repair, and clean to a usable status on the back end. So the deal you though may have given you an 80 percent savings, has now swayed to just 10 percent. This scenario would deem going directly to the manufacturer and getting a refurbished unit with a warranty a good idea.
In the past, there has not been any centralized consolidated pool of equipment that has been conditioned to meet the expectations of a company that is looking to have the risk taken out of investing in the equipment from the secondary market. There has always been a factor being sacrificed in the equation. Here are the main factors involved:
- Availability - Can the equipment needed be found quickly with minimal time and energy searching?
- Activation - Can the equipment be transferred and re-activated with knowledge of the processes?
- Condition - Can the equipment be in a clean, working state, free of cosmetic defects?
- Reliability - Can the equipment be held accountable for performance and longevity?
- Support - Is there someone to answer for any issues or problems regarding the equipment after the initial sale?
The elimination of risk is essential when investing in equipment represented on the secondary market. Some used equipment is junk. I have personally obtained shipments with 100 percent failure rate just based on cosmetics alone. With that said, I have seen equipment that was "still new in the box" that is considered junk because the cost to upgrade was now more than the cost to sell. But without the correct knowledge of the software, firmware, revisions in model types, compatibility of components, and other factors, a potential buyer can be misled into believing everything is perfect simply because it looks new in the original box.
There is really not much of a secondary market, as the service providers only reactivate a small number of secondhand units each year.
In the May 23, 2011 article of Transport Topics the COO, Brian McLaughlin, stated in terms of reactivations for 2010; "we had less than 100 across the entire [PeopleNet] network. There just isn’t a large aftermarket pool of PeopleNet units out there." Spread out over the year 2010, Pivot Technology Resources actually reactivated 128 PeopleNet units alone, and this number doubled in 2011 to 255. These went out to accounts ranging from a single OBC to fifty complete sets. Take into consideration that this is not accounting for any other transfers from private sales between fleets either. Of course, "a small amount" is subjective to interpretation to what "small" really represents. Also factor in the estimated hundreds of units that were purchased back by PeopleNet during the shortages of OBCs. On separate occasions in 2010 and 2011, customers would have to wait up to five weeks before delivery of new OBCs on account of lacking inventory.
PeopleNet is doing a great job controlling their units in the secondary market with extreme transfer fees, instilling fear in customers' eyes by owning used PeopleNet equipment without having the assurance of a factory warranty, and the overall lack of support when dealing with a customer supporting and investing in equipment from the secondary market. In fact, this victimizes everyone involved but PeopleNet. Take a look at a scenario:
- In January of 2009, a company invests in new PeopleNet equipment to outfit their fleet.
- In October of 2011, the company cannot make it, closes their doors, and must sell the assets. The seller has newer, quality equipment that is less than three years old, has all components, and everything was functional and in good shape when de-installed.
- In December of 2011, the company finds a buyer for the equipment after much time spent placing ads and trying to act like a PeopleNet salesperson.
- The buyers contact PeopleNet and find out that there is a $350 transfer fee associated with buying a system from a private seller and decide to back out because the seller would still like to get some of the original investment back for this quality equipment. Immediately, the equipment no longer holds as much value to anyone in need or the seller.
- The seller ends up dropping his price to the ground. The buyers end up paying for the equipment and the transfer fee to save money by going with the used equipment.
- What happens when too much equipment is ordered? Do they buy the equipment back?
- When a company downsizes their fleet, what happens to the equipment taken out?
From my experiences with other manufacturers such as Qualcomm, GeoLogic, and even SkyBitz, there has been very little push back in regards to moving units around on the secondary market. The transfer process, ease of communications, willingness to provide support, and the minimal fees associated are virtually a non-issue to most customers. I feel there is a responsibility that these companies adhere to for their customers whether it effects new sales or not. They are not only providers of equipment, they are service and support providers as well.
In closing, many of my questions a potential consumer in the mobile communications and asset tracking market should be brought up on the front end as well as the back end in potential re-seller aspects, much like the initial decision on who they should go with as a provider of services:
- How reliable is the equipment? What is your current failure rate?
- What is the average working shelf life of your equipment new? In other words, how long should the equipment last from date of purchase?
- How does your customer support handle issues with failures?