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Third-Party IT Maintenance is an Attractive Alternative for Enterprises and Government
Today’s realities are that if you are an IT asset manager in the private or public sector you are being (and I will be polite) asked to do more with less. Management is telling you that it is your responsibility to “sweat the assets” and achieve better returns on investment (ROI). At the same time you are being (and again I will be polite) urged to help drive efforts to improve your various stakeholders experiences.
Given the complexity of your responsibilities, the question that arises is how can you meet all of these demands?
A logical and critical place to look is third party maintenance. The industry was born in the 1970s at the dawn of the computing revolution as companies looked to outside help to simply maintain their equipment. And, while this part of the IT industry tends to get little press attention, it has become vital in assuring optimized business performance for enterprises large and small around the world. It is also much more than you think in terms of the services delivered and the value that can be derived.
It is also the reason why not just businesses, but the U.S. Federal government agencies are turning to third party maintenance not just to reduce maintenance costs in general, but also to support capabilities, hardware and increasingly applications, that may have been end of life by OEMs but still are immensely valuable and need to supported in terms of current operations and their integration and ultimate migration to the future.
During a recent webinar I hosted, Federal Agencies are Choosing Alternative IT Maintenance – What They Know and What you Should Find Out, Todd Bone, founder, and Reza Koranki, TAC Operations Manager at XS International, explored the evolution of third party maintenance, where the industry stands in terms of helping customers meet the demands of today’s dynamic markets, why the value prop for 3rd party maintenance is so compelling for governments, and what is being done for engaging federal agencies to adopt third parties as trusted vendors.
While we covered a lot of ground, it seems appropriate to highlight Todd’s list of seven common reasons to consider third party maintenance:
- “End of support.”73 percent of customers cited “end of support” for existing products as their reason for upgrading new products. This is driven by reasons that have little to do with the viability of those products but a lot to do with generating OEM profits.
- OEM maintenance is expensive. Consider that: Forrester (News - Alert) Research reports 76 percent of the total corporate IT budget is allocated to maintenance, operations and support; a recent poll indicates maintenance was the biggest pain point for budgets at 40 percent compared to 30 percent for upgrade costs in order to stay maintained; and OEMs make up to 80-90 percent PROFIT on maintenance.
- OEM’s outsourcing overseas has frankly reduced their service level.
- Simple contract management and support. Cisco (News - Alert) Technical Staff for example is not cross trained on other manufacturer’s equipment, and OEM finger pointing at another manufacturer when things go wrong is why 3rd party maintainers became a good option starting in the ‘70’s.
- Co-terminus ads and deletes. For example, Cisco does not allow co-terminus additions of equipment and deletions for discontinued equipment during the annual contract on a prorated basis, every time you add a new switch you are buying a new one year contract, and when you discontinue a product the customer is stuck paying for maintenance they don’t use.
- Payment Options. Several OEMs require annual payment up front and while this may not be a bad thing if they were giving an annual discount a monthly payment ensures you are only paying for services used and not also for unused service on obsolete equipment that is only obsolete in the eyes of the OEM.
- Flexibility. Todd states that: large companies and vendors are not flexible, OEMs can’t be as flexible as 3rd party maintainers, and customers want the right to go to anyone for support and maintenance.
In regards to the U.S. Federal government and its mandate to take a long and hard look at IT procurement (including evaluating cloud solutions) and less expensive maintenance, Todd cited a few interesting factoids.
Today, federal agencies recommend 3rd party maintenance through internal whitepapers. Agencies buy support through contract vehicles. The most well- known one to the public is the GSA (News - Alert) Schedule. XSi has been on GSA since 2002 as a Prime Contractor and now have over 60,000 Alternative to Cisco Maintenance SKUs on GSA. Interestingly, only eight percent of all IT is purchased through GSA. The majority is purchased through other Federal Contacts dominated by Prime Contractors including Northrop Grumman (News - Alert), Lockheed, Boeing and L3 – all of which subcontract XSi for support.
It was further stated that, “Agencies are gravitating to 3rd party maintenance because of budget cuts. One agency recently called us and said their budget for Cisco maintenance was cut in half for next year. It’s an easy cost savings and since the Prime Contractors and XSi already have decades of performance history with agencies, it’s easy to justify and purchase.”
If you wish to know more about how and why 3rd party maintenance is probably not anything like what you might have thought, and in fact is something to seriously consider, you are invited to download the achieved version of the webinar for further details.
Edited by Brooke Neuman