How Does Third-Party Maintenance Improve IT Shop Bargaining Position?

The IT research organization Gartner has identified yet another cost advantage. It comes down to the relative bargaining position of the IT organization as they consider hardware acquisitions.

How OEMs Foster Vendor Lock-In

Companies know well that it’s great to have customers coming back for more; it can be an indication of a great product or service. But it’s also something that OEMs strategically promote through their support pricing arrangements.

As Gartner puts it:

I&O leaders who restrict themselves to vendor-supplied maintenance often find themselves doing infrastructure refreshes due to punitive vendor policies around postwarranty support pricing that means keeping their systems on maintenance is more expensive than replacing them.

These users also frequently find themselves in effectively sole-source situations because of an incumbent vendors’ ability to use maintenance waivers to create financial barriers that are too high for nonincumbent storage vendors to overcome.

Many IT pros have experienced these effects directly. Three-year support contracts are frequently purchased alongside new storage systems. Then, as soon as an array becomes stable and reliable, it seems, the contract comes up for renewal—and there’s sticker shock. Extended support is priced very dear.

What’s the OEM’s response? Buy a new system, and we’ll waive some or all of the maintenance fees.

There are many problems with this scenario:

• Replacing existing systems before their effective lifespan is up reduces ROI on hardware investments.
• Capital is expended on storage hardware with features that aren’t “must haves” for the business.
• Additional staff time is spent installing, configuring, and training on new systems.
• The organization can’t capitalize on the deflationary pressures on storage hardware pricing. (In other words, IT always pays top dollar for brand new products because of OEM incentives)
• It becomes a struggle to bring in a different hardware vendor—potentially with products better suited to the environment or the business needs—because the incumbent’s maintenance waivers are so valuable.

How Third-Party Maintenance Breaks Free

As Park Place covered previously, the OEMs work to make customers wary about TPM—and for good reason. Bringing in an alternative maintenance provider breaks their hold on storage acquisition decisions in several ways:

• Maintenance contract pricing. Third-party maintenance often costs between 40% and 70% less than OEM support. This factor alone can make it financially attractive to keep existing hardware in service. An added bonus: bringing a TPM to the table can even cause the OEM to negotiate.
• Extended hardware lifespan. With extended lifespans comes the option not to purchase new storage systems until the features and capacity needs of the business warrant it. 
• Less costly, older systems become an upgrade option. Not only can IT organizations skip a generation or more, they can buy in to new technology longer after the release date, knowing that they can still get full service life from it.
• No maintenance waiver. This puts other OEMs on par with the incumbent so everyone at the table has to come in with their best offer on price and service.

And really, that’s what every IT leader would like—to get the best possible deal on the right equipment when it’s truly needed to meet emerging business requirements, and not a moment before. Gartner has pointed the way.

Blog post modified and posted with permission of Park Place Technologies.