Oct 25 Third-Party Maintenance: Reliably Forecasting the Savings Potential
Just last week, I attended an industry conference in Madrid and listened to an IDC presentation, in which the analyst explained that 42 percent of the world’s enterprise IT departments are now using Third Party Maintenance (TPM) and the two primary reasons: “Cost savings” and “easier to do business with.”
But those of us in this independent hardware support industry also understand that 58 percent are still NOT using a Hybrid Hardware Support model, embracing Hardware Lifecycle Management best practices and proactively reducing IT budget waste. Following an explanation of Hybrid Hardware Support and Hardware Lifecycle management, I’ll share a simple method to help readers quickly forecast/quantify the financial benefits of Third Party Maintenance in their unique environment.
- Hardware Lifecycle Management: This is the practice of carefully understanding your actual hardware needs vs. your critical hardware needs, whereas critical needs are attached to urgent business drivers or executive mandates, then non-critical hardware assets are retained for longer periods after warranty expiration to permit a maximized ROI. This practice permits you to delay capital investments, but also drive down operating expenses by using independent support providers.
- Hybrid Hardware Support: This is where hardware assets (e.g., servers, storage, and network gear) under warranty is maintained by the OEM, but post-warranty assets are maintained by a significantly less expensive independent hardware support provider (like XSi).
In 2017, Gartner published a report stating that 71% of the world’s 100 largest companies are now using independent hardware support providers. One might be prone to ask the rhetorical question, “If this hybrid support (independent) model is so widely accepted by your largest competitors, why have you hesitated?”
In the last two years, an industry ally of mine built a very simple formula to help readers forecast the financial impact of adopting Hybrid Hardware Support, for your specific environment. Check this out:
- Identify the percentage of your company’s hardware assets that are indeed in a post-warranty (“X”) status.
- Identify the total estimated annual hardware maintenance spend (“Y”) for all hardware assets – both in-warranty and post-warranty.
From those two data points, use the following to forecast the savings potential in your environment:
- When X is 18%, you can drive 10-11% reductions to Y (total annual hardware OpEx)
- When X is 20%, you can drive 11-12% reductions to Y
- When X is 22%, you can drive 12-13% reductions to Y
- When X is 24%, you can drive 13-14% reductions to Y
- When X is 26%, you can drive 14-15% reductions to Y
Beyond the savings potential or the “ease of doing business with,” independent providers often work harder to earn and retain your business. The very best independent providers will have the agility to build custom solutions for your unique environment, and regularly evolving business drivers.
New Service Announcement from XSi
In September 2019, we formally announced a new service: Cisco Lifecycle & Asset Assurance. If you’re looking for a better IT maintenance solution (consider entitlement compliance) and missed the announcement at the XSi LinkedIn Profile, we welcome you to read our Newsletter, XSi Team News & Gartner Recognition.
About the Author
Todd founded XS International in 1990, helping to build an independent IT support organization led by pioneering executives with proven tenures at Cisco Systems and Juniper Networks. He holds a board of director positions with the world’s two most prominent associations for independent IT support providers – Service Industry Association (SIA) and ASCDI (hardware resellers). He was a founding member of the Digital Right to Repair Coalition (now known as Repair.org, and continues to serve on their Board of Directors. As a hobby, he also co-founded VinoApp, specifically for Argentine wines. Very much a serial entrepreneur, Todd earned his Bachelor’s in Finance from Ohio State University and later completed a three-year Entrepreneurial Masters Program, given by the Entrepreneurs’ Organization & MIT Enterprise Forum. He resides in the greater Atlanta area with his family.