Vendor service contracts can be a bit confusing for the end customer. On one hand, they want save money. The economy has taught them that being frugal during these times pays. But on the other side of the coin, they want to ensure that their investment is protected. Let’s have a quick look at when it makes sense to get a vendor support contract and when it doesn’t.

Typically, IT companies want you to have “vendor supported” machines with valid service contracts because in essence, it reduces the time they have to deal with them. This is part of a flow through model where the responsibility for the repair of the machines is simply brokered out to the vendor so that the IT company can support more machines with less resources.

Show Me The Money!

It’s all a numbers game these days. The economy hasn’t been any kinder to the IT companies so they’re thinking the same way as their customers in many cases. The flow through responsibility model is aimed at improving profitability, however this doesn’t usually help out the customer too much.

Popping the hood on a computer for any reason can be an expensive task. There’s the travel time to get to the site, then there’s the labor to actually do the work, and then there’s the risk of damaging components resulting in replacement costs. How easy would it be just to point the finger somewhere else and have them do it? Well, that’s exactly what happens.

The IT company has you box up the machine and ship it to the vendor, who is only too happy to do the work. They’ll gladly replace parts and monkey under the hood for hours because they expect you to forever renew your service contracts that you originally bought. It’s a numbers game here. Just as an insurance company makes a profit by bringing in more than they pay out, so does the manufacturer of your PC.

So When Should You Buy A Service Contract?

Well, for us it’s also a numbers game. When we’re dealing with smaller companies with around 10 seats or less, we will typically recommend vendor supported contracts. This isn’t about pushing the responsibility around; it’s about guaranteed SLA’s for companies that need them. If a machine is vendor supported, it means they have a requirement, based on a service level agreement, to have parts at your door. Usually this is next business day, and that can make a big deal with your finance department of one needs to do a cheque run to pay vendors.

When the company is a bit larger, we’ll typically order a hot spare machine and skip the vendor contracts. They really don’t like it when we do this, but hey, it’s about doing what’s best for the customer in our books. Service contracts in bulk on 15, 25 or 250 machines can get costly very quickly and send any IT budget into a tail spin. But the $600 cost to have a hot swap machine that can get that finance department back up within the hour starts to look a lot more attractive.

Some Things Are Best Left Covered

There is a caveat to this that we need to stress. Servers and networking equipment are a whole different ball game. These devices control the life blood of any IT infrastructure. They’re like the major highways, railways and airports of a modern metropolitan city. When they go down, they typically wipe out access to everything, or in the best case, severely impact multiple business units.

Business owners call this Armageddon. IT companies call this a blank cheque. But whatever you want to call it, it’s just a very long, bad day for everyone involved. This compounds even more if you have a significant other that’s tired of you having to stay late to deal with “computer stuff”.

We avoid all this by putting next business day support contracts on our entire core infrastructure. By doing this we know exactly when a replacement is coming and we have guarantees on when we can have a customer back up and running. In addition, we keep hot spares in the office for “within the hour” temporarily resolutions until their original gear is fixed.

Whatever method you choose, be sure that you have an agreed plan in place. Make sure you understand your business needs and tailor a warranty strategy to your specific requirements. It doesn’t matter how you plan to do things, but it does matter that your IT provider is having these business critical discussions with you and that they enable business, not hinder it.

With the increasing level of noise singing the praises of managed services as the future, it may be worth taking some time to consider how a fundamental shift in the way IT is provisioned may impact a business in reality. Under the right circumstances, managed services can be a blessing that leads to improvements in functionality and performance, mitigation of risk and reduction of the total cost of ownership. However, the path to enlightenment has many pitfalls. Here are a few of the big ones to watch out for.

1. Lust

A single point of contact can offload the guesswork, simplify the process and save valuable time in the event of technical issues. Conversely poor service can become a single point of failure, leaving you at the mercy of your provider. Providers might promise the world in order to get you into bed, yet over time commitment can end up very one sided. Ensure that the terms and conditions of services proposed are reasonable and appropriate to your anticipated needs, and that expected service levels are contractually agreed. This will allow room to maneuver and avoid the ‘honeymoon period’ scenario.

2. Gluttony

Factors such as the savvier buyer and diluted marketplace have seen the profit margins on hardware in steady decline since the industry’s ‘boom’ period in the early ‘90s. Traditional resellers are now engaged in a race to ‘land grab’ as much contract business and recurring revenue possible ahead of the competition.

There’s been a lot of talk recently about the commoditization of information technology in business. Be it for software (or x) as a service, hosted solutions or anything flying under the ‘cloud’ banner, a huge amount or marketing money has been pumped into the industry in recent months. While managed services, like any other IT service on demand can offer some persuasive benefits, take care to decide whether a potential provider truly understands how managed services will work for your business, and not simply over indulged on vendor hype.

3. Greed

The ugly truth is that many managed IT service providers actually profit from their client’s misfortune. This is especially true where they charge for their services by the hour. An agreement based upon a flat monthly fee will help ensure problem avoidance remains mutually beneficial.

4. Sloth

It is incredibly difficult for a client to quantify, validate and benchmark work completed in return for the price demanded. Frequently, businesses pay to rectify problems that could have easily been avoided with a little proactive attention. Look for a provider who will actively monitor your systems in search of problems that otherwise left untreated may result in disruption.

5. Wrath

If you suspect a managed service arrangement will make financial sense, don’t wait until problems occur before seeking advice. Allow yourself time to fully research options, compare value of competing providers and consider all scenarios you’re likely to face. It is all too easy to sign a contract based on your immediate needs, especially when you’re recovering from a bad experience your back is against the wall.

6. Envy

One of the main advantages of any form of commoditized IT service is the ability to dynamically adapt in order to meet the changing needs of the business. This includes service provider. In reality this benefit can quickly become an illusion. Take care to ensure a provider will give you full and up-to date documentation of your infrastructure, detailing everything an alternative provider would need to assume responsibility should the need arise. Such measures will help safeguard against offloading control, not just the responsibility.

7. Pride

Building on trust, your relationship will involve sharing access to intellectually property, potentially sensitive business information and operating procedure. It is extremely advisable to sign a mutual confidentiality/non-disclosure agreement when you begin talking. With the best of intentions, providers may wish to promote their relationship with you to the world in order to build credibility and attract new clients. It is important to consider precisely what and how much you want your competitors and stakeholders to know.

In summary, it is vital to understand the terms of engagement and what you’re really getting into when considering a relationship with a managed service provider. You must trust that a provider will act in the best interests of your business. A good provider should bring clear value and bear the responsibility for your business systems, not the control.

Technology can be a great enabler to a business. Why else would we invest our valuable time, money and effort in something if it didn’t bring us value? Yet all too often, the utopian view of technology sold with the box is diminished over time. When it doesn’t work as we’d expected it becomes a source of frustration, a necessary evil, an expense to be swallowed. When this view is shared with those you trust to keep the wheels turning, the bill you pick up each month may be only the head of a much larger, uglier beast.

To help you avoid what lies beneath, here are four areas you may wish to consider when calculating the true cost of technology.

Supporting the Workforce

Ever been bounced around a call centre, looking for answers but getting nothing but Greansleeves, or wanted a reassuring voice but got voicemail? Ever been told that something or someone else is to blame? Issues are inevitable from time to time, but if the workforce is actively supported, the impact is considerably lessened and these issues don’t tend to become expensive and time-consuming problems.

The Day After Tomorrow

When something stops working, worst case scenario is that part or all of your business grinds to a halt. The technology you’ve come to depend on now presents a roadblock. The opportunity cost of lost time, production and revenue resulting from technology failure is rarely anticipated or budgeted for. Yet when networks are not proactively and competently managed, the only real uncertainty is when, not if disruption and cost will transpire.

Reputation is Everything

The service you provide your clients is only as good as the service you receive as a client. Be it internal or external service providers you rely upon to keep things running smoothly, interruption to business can lead to embarrassment, damaged customer loyalty and tarnished reputation. Although such costs are largely intangible, they shouldn’t be dismissed or taken lightly. Whether you run into, resolve or (hopefully) avoid problems, large or small, consider the value your technology provides to the workforce and consequently, your clients.

Forget About the Price Tag

It’s false economy to by a cheap setup with a limited life expectancy. By the same token, it doesn’t take a sledgehammer to crack a walnut. If you’re not sure it’s appropriate for the job it’s required to do and can’t get a simple answer, chances are it’s not. When investing in technology, be sure to bear in mind the desired result and the factors crucial to its success or failure. While initial outlay is important, the true cost of investment includes all of the resources that will go into keeping it working of the course of its life expectancy.

In summary, when considering the true cost of technology it is important to look beyond the bill you pick up at the end of the month, be it for new assets, ongoing management or problem resolution. Yes, this is important, but only when evaluated against the actual returns demonstrated. Take into consideration the far-reaching ways in which your technology and support impacts your business, the ability of your workforce to perform, and the service received by your clients. This will help you make more informed decisions about how and where you invest, and ensure control over costs remains firmly in your hands.

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