TECH, BUSINESS AND CAREER INSIGHTS

How to Buy a Smarter Maintenance Contract

By: TSP Blog | @TSProckstars

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When it comes to the equipment that runs your business, it’s vital that it performs at the highest level. As broken parts and software issues can leave your company in peril, it’s crucial that you mindfully purchase maintenance contracts and support agreements. But, if you’re not an IT expert, it may be difficult to know whether or not you’re purchasing the best possible maintenance contract for your business.

Many businesses will opt to choose the Original Equipment Manufacturer’s (OEM) maintenance contract, as it’s often the most obvious option. However, before agreeing to this, you should question if it’s truly the best fit for your organization. Understanding a service agreement and being able to communicate your needs will help you save time and money in the long run.

When a company purchases new equipment, they typically have the option to add either a standard or extended warranty for that hardware. Even though the manufacturers of your equipment want you to purchase their maintenance warranties, they’re not necessarily in your company’s best interest.

OEMs produce the warranty to appeal to customers with convenience. Often, this after-purchase promotion is treated as an upsell opportunity for the OEMs further enabling them to increase profits. Additionally, by keeping the customer’s business for the life of the contract, the OEM is largely eliminating third-party competition.  

However, for many businesses these prepaid contracts are unnecessary, adding costs that initially appear to be cost-effective but don’t offer the same flexibility of possible alternative maintenance offerings. The focus of your maintenance contract should be to maintain your equipment in order to provide optimum output for your business over the course of its service life. Consider these alternatives when choosing the support agreement that best suits your company.  

PURCHASE THE BASE OEM’S WARRANTY
Often, the OEM will offer a standard or base warranty for its hardware for a period of one to three years. If the equipment you’re purchasing is a new model of has software that will require updates as they’re announced, signing a base warranty to cover the equipment is beneficial. On the other hand, if the equipment is mission-critical, purchasing a third-party maintenance warranty to provide constant support will save your organization a lot of money, while still entitling you to updates and bug fixes.

When the base warranty expires, it’s the most optimal time to make the full switch to a third-party maintenance provider. Consider that the vast majority of firmware updates are released in the first year of a product’s lifecycle and will be almost nonexistent after three years.  

NEGOTIATE WITH THE OEM AT THE TIME OF THE HARDWARE PURCHASE
For the most part, when a business makes an initial equipment purchase, they’ll mindlessly agree to the terms and conditions of the warranty or extended support contact. However, as with anything in a structured service contract, you should know that everything is negotiable. As a customer, you have the absolute right to negotiate your maintenance contract.

So, what should be negotiated? To start, you should request software and hardware support costs as separate cost structures. While many OEMs bundle this cost as a selling strategy, you maintain the right to see it separately. This will ultimately give you more leverage if and when you decide to part ways with the manufacturer. Then, you should negotiate with the OEM to maintain access to critical firmware releases for the life of the asset, regardless of whether or not it’s under the OEM’s support agreement or not. Too often, the OEM will discontinue firmware entitlements if the customer chooses an alternative support strategy. Obviously, this is an attempt to eliminate the competition.

POST-WARRANTY SUPPORT IS ESSENTIALLY RISK-FREE
Reaching the end of a maintenance contract doesn’t mean that it’s time to replace your equipment even if it’s at its designated end of service life. Alternatively, this is one of the most optimal times to transfer your support to a third-party maintenance provider, because at this time the equipment’s parts have flooded the market, bug fixes are rare and third-party technicians have been trained. 

UNDERSTAND YOUR COMPANY’S NEEDS
Your priority should always be to ensure that your equipment is protected. Therefore, understanding your business needs will help define what your maintenance contract should look like. While an OEM warranty might initially seem like the best option, it’s important to consider and understand all possibilities. Further, a third-party maintenance provider is a valuable option to support the needs of any business during the life of their equipment.

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