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Four strategies for third-party hardware maintenance

IT leaders need not fear moving maintenance agreements from original equipment manufacturers to third-party maintenance providers.

Overview

Organizations can reduce the costs of maintaining IT hardware by up to 50 percent, and increase service quality, by switching service contracts from original equipment manufacturers (OEM) to third-party maintenance (TPM) providers.

While some IT leaders worry about switching from name-brand to “generic” service providers, Accenture’s experience indicates that many TPM companies provide high-quality services at reasonable prices. In fact, thanks to larger global footprints, some TPMs are able to provide better service in some localities than OEMs can. In addition to cost savings, TPMs offer benefits that include:

  • A direct global support model

  • Inventory management services

  • Flexible service-level agreements

Third-party maintainers provide technicians and parts to maintain IT products from desktops and laptops to mainframes and storage. Many TPMs began their businesses by providing end-of-service-life support for “sunset” equipment that is no longer supported by manufacturers. From there, these service providers expanded their capabilities to include current versions of hardware products. Some TPMs even provide warranty support for some OEM manufactured equipment.

Many OEMs that offer outsourced services rely on TPMs to augment their internal service provider capabilities to support equipment manufactured by others.

OPPORTUNITY

We continue to see opportunities to reduce maintenance costs through any of the following options:

  1. Use third parties as a competitive threat to existing OEM suppliers.In many cases, OEMs will be reluctant to reduce their maintenance prices at warranty expiration and renewal. In addition, OEMs sometimes insist that their operating system and firmware maintenance cannot be separated from their hardware maintenance. We have found that these activities can be separated if negotiated independently, especially at the time of new equipment purchase. Clients can achieve overall savings by engaging TPMs, even if doing so results in higher software and/or firmware support costs.

  2. Competitively bid third parties. The TPM market changes frequently as companies merge, acquire or divest maintenance support capabilities. As a result, even a company that is already using a TPM can further reduce costs by accepting competitive bids at contract renewal.

  1. Compare pricing options. Many TPMs are moving from a monthly recurring-charge model to a fee-plus-service-call model. In the latter, an upfront fee covers availability of support staff and part warehousing but not the actual service calls. Conducting a thorough analysis of historical customer support call volumes, by equipment type, can provide useful intelligence to help calculate the most cost effective pricing model for specific equipment. By dividing the initial fee by the expected service call volume and adding in the service call costs, organizations can easily compare the annual costs.

  2. Eliminate maintenance contracts where possible. In some cases, the number of hardware failures on devices such as laptops might be low enough to support not having extended warranties. In the case of network equipment, having spare devices on hand can eliminate the need for maintenance support.

Case Studies

Leading Consumer Packaged Goods Company

A leading consumer packaged goods company had a large amount of hardware from a major equipment manufacturer in its data centers. The client was paying the same supplier for all of its hardware maintenance, at great expense. The client was also unhappy with some of the services it was receiving from the manufacturer, whose responsiveness fell short of expectations. Accenture recommended that the client evaluate third-party solutions as one way to save money and potentially receive higher-quality service.

With the client’s assistance, Accenture developed a formal set of requirements for inclusion in a request for proposal (RFP). The RFP included a detailed inventory listing, high-level equipment configuration, and the location of the equipment. After the client selected two finalists, Accenture created a detailed total cost of ownership analysis and then negotiated all aspects of the contract, from maintenance costs to peripheral services.

The transition to TPM created savings for the client of 52 percent.

Leading Financial Services Company

A leading financial services company wanted to reduce maintenance expenses. Accenture advised the client that it could do so by switching maintenance from the equipment manufacturer to a third-party provider.

Accenture conducted a sourcing event on behalf of the client and identified three potential suppliers to provide quotes for a predetermined list of equipment.

To maintain a highly competitive atmosphere, the client selected two vendors through a thorough sourcing process. Accenture engaged with these providers to negotiate best-in-class pricing structures as well as industry-standard contracts. Similar to the consumer products company example described above, Accenture created a detailed total cost of ownership analysis and then negotiated all aspects of the contracts, from maintenance costs to peripheral services.

The client realized savings of 51 percent.

Results

The experiences of these two organizations demonstrate why IT leaders need not fear moving maintenance agreements from original equipment manufacturers to third-party maintenance providers. Doing so can reduce overall expenses, even if software support costs rise. And in some cases, TPMs offer better service level agreement (SLA) options, the ability to terminate or modify services on a monthly basis and other capabilities that OEMs are not willing to provide.


Authors
Gunasheel Krishnamuti
Gunasheel Krishnamuti

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Eric Dulin
Eric Dulin

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Mark Hillman
Mark Hillman

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