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When Do Vendor Service Contracts Make Sense?

Published On 
November 11, 2022

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.

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Lumitiv is an experienced Calgary based IT Support and Cyber Security provider with over 14 years on the job. We help simplify and guide businesses through the technical landscape.
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