16 Jul Information Sources Help Understand Third Party Maintenance

My recommendation is that you do some homework and get to know what TPM is all about. You can certainly do a Google search and find many websites and offerings from some of the players in the market. But be careful, because we all know that just “because it’s on the Internet” doesn’t mean it’s true. 

Important Industry Studies You Can Use

I’m sure we are all aware of Gartner, the top IT industry analyst firm. Gartner analysts Christine Tenneson and Stanley Zaffos are experts in TPM, and have led many studies about this market and the services available. Of the other analyst organizations, IDC, Forrester, and Aberdeen Group, only IDC has written about TPM. In June of 2016, Rob Brothers, IDC analyst, wrote the report “Cut Operational Costs: Third-Party Maintainers for Legacy and Stable Datacenter Environments to Help Invest for the Future.” Although it’s a few years old, you may find this report useful.

Gartner continues to research various components of the TPM space and issue forward-looking studies and surveys to help us understand key trends, problems facing the industry, opportunities for growth, etc.

One valuable study from Gartner is “How To Reduce Network Equipment Maintenance Costs.” Although it was published in May 2014, it contains some great information. To keep this simple, I will quote from the summary at the beginning of the report:

Each year, maintenance costs swallow 15% to 25% of total enterprise IT budgets, and network managers must constantly reduce and control these expenses. Gartner has identified four ways to decrease network maintenance and support costs that can be applied to all types of networking equipment.” 

My comments on this: Note that this is a major issue. Maintenance is a large cost for most organizations and one that they probably overlooked. One reason it is so high is because of the insistence by OEMs and resellers that their exorbitant and sometimes ineffective support contracts are necessary. You have alternatives that are cost-effective and maintain service levels.

More from the Gartner Study: 

Key Challenges (per Gartner):

• Selecting the same level of service for all equipment is a common practice, however, it results in wasted and/or sub-optimal expenditures.
• Enterprises don’t usually focus as heavily on negotiating the best prices for support and maintenance contracts as they do on purchasing network equipment.
• Because managing and controlling network maintenance contracts with different providers and expiration dates is difficult, the renewal process is tedious.

Recommendations (per Gartner):

• Negotiate initial maintenance prices at the same time you negotiate equipment purchase prices.
• Ensure that your network equipment has the appropriate maintenance service level, based on business risks, type of equipment, age of equipment, and the equipment’s relative importance to the business.
• Co-terminate and centrally manage your maintenance contracts by using inventory and contract management software tools or a service provider for inventory management services.
• Take advantage of limited lifetime warranties for less critical and more stable parts of your network.

This is such valuable information! First, note how Gartner identifies that many of these suggestions are not current business practices. And yet, they identify many opportunities to use TPM. The types of information and inventory tools they mention are typical of what third party providers offer. Gartner is recommending that these issues be addressed at an early stage and that there are many factors to consider, primarily based on business risk factors compared to the age and functionality of the equipment.

The report goes on to analyze the various options from using the OEM Support, Reseller support, TPM and Self Support. The main recommendation is that there are advantages and business risks to each. A hybrid approach is suggested. They highly recommend that TPM alternatives be considered at the time of equipment purchase. This is not usual in my experience.

Finally, the report shows the potential cost savings from various service levels and use of outside vendors. There is a wide range of service levels from Next Business Day (NBD) 8 AM to 5 PM all the way to 24/7 with 2 hours support onsite. The costs can vary dramatically, so it pays to analyze what you really need from business risk and tailor a program for your shop.

I also want to mention a second Gartner report from August 2012 titled “Know When It’s Time to Replace Enterprise Network Equipment.” The report summary is:

Four primary factors determine the useful life of network equipment: market innovation, vendor end-of-life policies, operating life and operating cost. Failing to assess the EOL of equipment properly will result in premature equipment replacement or increased risks for the organization.” 

So, obviously, the main issue here is useful lives of assets. You can’t rely on OEMs to dictate these lives. Mean Time Between Failures (MTBF) is relevant here. Gartner notes that MTBF is often 4 to 10 years beyond what the OEMs allow. In any event, this report, with other industry analysis, shows us a playbook where we can be true partners with our clients in planning their IT strategy. I wanted to share a chart from this report that really depicts what the issues can be:

Useful Lives vs. Depreciable Lives of Selected IT Infrastructure Assets *Source: Gartner, August 2012

You can study these working, useful lives versus the lives possible. I would just point out the first one: LAN switching. The life extends to 10 years. Compare this to refresh or replacement cycles from OEMs like Cisco, which may dictate depreciation lives of three to five years! This is why there is so much concern and frustration.

I’d like to recommend another Gartner report updated June 2016, “Used-Hardware Resellers Offer Hardware and Support Cost Savings.”

This report offers an analysis of the used/refurbished/new market for hardware acquired from sources other than the OEM. I won’t get into the details of that analysis here other than to say that alternative hardware vendors should be considered and note that many have third party maintenance services, either in-house or in partnership with TPMs. Here is a very interesting chart from that study that summarizes many of the major issues and findings:

Figure 1. Impacts and Top Recommendations for Enterprise IT Buyers and Procurement Professionals

The study also offers a very interesting observation that is consistent with the approach we use with our end-user clients:

“Some hardware resellers and TPM providers are very good at helping clients evaluate and ‘optimize’ support spend. These providers consult with clients (usually at no charge) about:

• Which devices should be considered within a used-hardware strategy.
• What level of coverage is appropriate for a range of used hardware.
• In which use-case scenarios one might consider utilizing spare equipment on-site and/or at a service provider’s depot (also known as “sparing”), rather than maintenance agreements.”

Another more recent study, “Market Share Analysis: Hardware Support Services, Worldwide, 2017,” issued in June of 2018 by Christine Tenneson of Gartner, points out that this market is still largely dominated by the global OEMs who are desperately trying to retain and grow this business because it is so profitable for them. Here’s what the report says:

Key Findings

• Hardware support service spending continues to erode globally, principally as a result of shrinking attachment rates, increased pricing pressures, increasing use of third-party maintenance (TPM) versus OEMs, and cloud shift.
• As the value-added reseller (VAR)/solution provider consolidation trend continues, end-user organizations are looking to consolidate support providers as part of that effort. This creates continued hardware support pricing pressure.
• Hardware support consolidation exercises provide some pockets of hardware support opportunities for providers offering multivendor or hybrid maintenance solutions.
• The top 10 hardware support vendors make up 48.0% of the market and represent support for devices including but not limited to printers, servers, storage, networking and communications equipment. Eight among the top 10 hardware support providers experienced negative growth: IBM, Cisco, Hewlett Packard Enterprise (HPE), Ricoh, Canon, Fujitsu, Dimension Data and Fuji Xerox.

Recommendations

Technology product managers responsible for hardware support services looking to exploit IT services dynamics should:

• Develop multivendor maintenance offerings and actively promote
  support consolidation.
• Deliver hybrid maintenance solutions using a mixture of OEM hardware support and third-party support to remain price competitive.
• Create partnerships to augment hardware support capabilities in other product areas, for other OEM equipment, or in other geographies.

I added the bullets above to highlight the increasing role of TPMs in the worldwide market for hardware support. Note that hybrid solutions are strongly recommended, and the drift from OEMs continues. However, the opportunities to reduce cost and improve service are huge, given the continued size of OEM support globally.

I include the following chart from the same report to illustrate what your options really look like. Note that the trend is moving to the right two columns since this is where IT executives and procurement professionals have found a great opportunity.

Finally, let’s take a look at one more recent Gartner report published in June 2017, “Competitive Landscape: Partnering With Third-Party Maintenance Providers for Data Center and Network Maintenance Cost Optimization.”

The report analyzes the trends in this market including the growth and consolidation of many TPM vendors, and what users are able to access from these vendors. One summary comment at the beginning of the report says:

“Third-party maintenance is offered by independent support providers with no relationship with the OEM. This alternative to OEM maintenance is the focus of this document and is becoming more common in the hardware support market, with a thriving ecosystem of independent support providers for server, storage and networking equipment.”

The majority of the report reviews the many TPM vendors, so if you want to get a good list of who is out there, you can review this report. Here are some of the major conclusions and observations from Christine Tenneson:

Competitive Situations and Trends

Because of these trends, the TPM market is becoming of more interest to service providers.

• Hardware maintenance is increasingly being considered as “nonstrategic IT” spending and procurement, with the result being that IT professionals are seeking low-cost alternatives to expensive OEM contracts and pricing.
• TPMs that are investing in and offering multiplatform remote monitoring and service automation will achieve a lower cost basis, greater scale, and sustainability for the long term.
• To achieve greater savings, some enterprises consider TPM support, especially for post-warranty data center equipment or for networking equipment at a campus or remote locations.
• Enterprises need to reduce capital expenditure (CapEx) spend in networking and data centers is a supporting factor to consider TPMs.
• Some enterprises consider the flexibility and customized support from TPMs as an advantage.
• Customers will often switch to TPMs when the original warranty runs out rather than renew the OEM support contract due to significant increases in OEM post warranty pricing.

While there are other organizations that have issued studies on TPM such as Forrester, Aberdeen Group, and IDC, our experience is that Gartner’s analysts have spent much more time analyzing the industry. However, you can find good information from all of them. Again, Rob Brothers’ report about cutting operational costs from June 2016 is worth a read. If you have questions about any research studies or would like copies of some of the Gartner reports mentioned in this book, feel free to contact us directly and we’ll be happy to pass along as much as we can.

Finally, I will note that there are several industry/trade organizations for the TPM and hardware reseller space. We are members of the Service Industry Association. This is the best known organization in our industry and, as one leading industry analyst stated, “any company serious about TPM is a member of the SIA.” The ASCDI and BrokerBin are also industry trade organizations associated with used hardware and TPM. Both organizations can provide additional information in your TPM research.

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