As Applied Creative Technology (ACT) expanded, the Dallas-based manufacturer sought to upgrade the entry-level telephone system it had started with. But $35,000 retail for a more sophisticated setup was considered a bit dear by ACT's management. Subsequently, the same system -- a Toshiba Perception E -- was found at 40% less. But here's the rub: the equipment was used. The vendor had purchased the components from another business and reconditioned them, and guaranteed they'd work for one year from the date of purchase.

"When we saw that," ACT controller Steve VanSteenbergen recalls, "we said, Wow, we can buy a lot more telephone for the money and still get a warranty." So ACT took the plunge. "It was our experience as a computer-equipment maker that the only difference between used and new is length of warranty," VanSteenbergen explains. "A telephone system is like a computer system. If it's going to go bad on you, chances are, it'll happen within the first three days. If it gets past that, it'll probably last a lifetime."

That was three years ago. The used phone-system components, which were acquired from Source, in Dallas, "have been working wonderfully ever since," VanSteenbergen reports.

As expanding companies outgrow old phone systems and install new ones, the preowned-business-phone business has grown apace, since telecommunications equipment is notably long-lived. Source, the country's leading telephone reconditioner and reseller, has annual revenues that have grown from $6.2 million in 1984 -- just after AT&T's divestiture -- to an estimated $34 million in 1993. Today Source inventories $3.9 million worth of preused parts and equipment, runs its own repair department, and proffers backing for rebuilt components that often exceeds manufacturers' own new-equipment guarantees.

ACT's "new" equipment has other advantages, as well. The system's handsets show the time of day and the length of the call in liquid-crystal display and boast user-programmable buttons. "We finally got stuff for the office phones that's been available at home for years," VanSteenbergen observes with good-natured irony.

As it expands to nearly 50 employees, ACT is perusing the used-equipment market again. Source is on the quotation list, of course -- but this time so are several others culled from trade-magazine ads and referrals. "Now that there are lots of resellers out there, each with about the same short-period warranty, a buyer would be foolish not to shop around," VanSteenbergen advises.

There's one caveat, warns VanSteenbergen: make sure the reseller can support the sale with technical assistance. At ACT, as at many small companies, the person responsible for the purchase is also responsible for maintaining the goods.