2 ISOs: THE SECRET TO REDUCING IT MAINTENANCE COSTS The Challenges of Sustaining IT Infrastructure Chances are that your company s IT infrastructure has evolved significantly over the last three to five years along with the challenges that come along with sustaining that infrastructure. In fact, a recent study by Forrester Research among IT leaders at more than 3,700 companies estimates that a business will spend an average of 72% of its total IT budget on sustainment, while allocating only 28% to new technological investments. Despite the fact that newer machines offer improvements in price, performance, and reliability, IT leaders tend to hold onto their servers and networking gear for an average of 4 to 5 years, and sometimes even longer. In fact, it has become the norm rather than the exception to hold onto IT assets until using them is no longer feasible. First and foremost, IT managers and executives face the challenge of minimizing IT expenses. According to CIO Magazine, the average IT budget for 2013 took up 5.2% of corporate revenues. Meanwhile American Structure Point, an IT consulting firm, recommends budgets be in the range of 4% to 6% of revenue. Given the fact that 72% of these funds go to IT sustainability, it s no wonder that organizations spend a total of $94 billion globally on maintenance support alone. Even this growth in spending, however, cannot fully address the difficulties of IT maintenance. Regardless of budget, IT Directors are pulled in many directions with limited resources. Often unnoticed at the board level unless a highly visible problem emerges, such challenges present themselves most prominently within three organizational groups: contracting, technical, and financial. The Problems of Decentralization The typical enterprise employs many different technologies from multiple vendors. Imagine having a Liebert generator, APC UPS units, DELL and IBM servers, and EMC storage, in addition to HP printers and Cisco and Avocet networking gear. You purchased these units on different dates, and they have multiple warranty expiration dates. Some pieces of your equipment are post warranty while others are either end-of-life, or end-of-service-life (EOL/EOSL). 1
3 Administering and organizing these different contracts is a time-consuming and difficult task and preventing expensive lapses in coverage and support requires extremely rigorous management. Service quality for this equipment may also vary widely depending on the geographic location of your company, and there is a very high probability that service quality will not be consistent from product to product. Having multiple Original Equipment Manufacturers (OEMs) may lead to finger pointing when problems arrive. Even more importantly, most manufacturers in the 21st century have reduced costs by outsourcing critical elements of their support operations such as call center, field service, and parts management to Third Party Maintenance (TPM) Providers, making service quality even more unreliable. Of course not all OEMs and TPMs possess the same capacity to deliver high-quality, efficient service. The chart below shows Key Performance Indicators (KPIs) of over 150 TPM 2
4 and OEM service organizations, and identifies the Best in Class companies that consistently outperform the industry average. First-time fix rates of Best in Class companies, for example, best the industry average by approximately 25%; meanwhile, Best in Class companies service level agreement (SLA) compliance is almost 10% higher than industry average. These differences can dramatically affect users IT operations, impacting both downtime and productivity. Key Performance Indicators of Industry Average & Best In Class Companies Key Performance Indicator (KPI) Performance Group Overall Average Best in Class Industry Average First Time Fix Rate (%) SLA Compliance (%) Average Dead on Arrival Rate (%) Service Parts Expense (%) Inventory Fill Rate/Spare Parts Availability Levels (%) % of Priority 1 Parts Order Filled Same Day (%) Data collected by Blumberg Advisory Group 2 3
5 The financial implications of these statistical differences are also significant. Studies have found that OEM maintenance costs can increase as much as 10-15% per year. Some OEMs have used enterprise maintenance agreements in order to lock their customers into purchasing both hardware and software support. In addition to these increases in cost, managing service contracts from multiple hardware vendors can often increase internal administrative expenses. Companies with a global presence face an additional administrative and financial burden, forced to issue purchase orders to international vendors, and to deal in multiple different currencies. ISOs: Combatting Decentralization IT Managers can pursue multiple options in order to confront these challenges. First, they can build their own in-house service capabilities; however, this is costly in terms of time and money, and knowledge can slip through the cracks when workers leave the company. Even equipped with in-house personnel, companies will still need to turn to OEMs or third parties to deal with more difficult IT issues that may arise. The second option is for multiple TPM providers to provide support for different brands of equipment located in different regions around the world. While TPM providers can cost up to 60% less than OEMs, this decentralization still creates administrative and logistical burdens. Thirdly, companies can employ an Independent Service Organization (ISO), which can provide a single point of contact for all maintenance needs on a global basis. Doing so allows enterprises to save costs through TPM pricing without giving up either quality or efficiency. In fact, ISOs can consolidate service contracts, streamline service event management processes, and provide timely and reliable service delivery, all of which improves operating efficiency and service quality. 4
6 Assessing an ISO ISOs with single-point-of-contact capability represent the best solution for global organizations that require hardware maintenance across a broad range of equipment makes and models.. It is vital, however, to fully vet the service providers capabilities before employing them. Not all ISOs are the same, and before selecting a vendor, you must consider a variety of criteria: 1 Multi-vendor Service Capability: Does your ISO have the skill set to support the manufacturers you either own or are considering buying? Customized Service Levels: You should pay only for the maintenance services and levels you need ; for instance, your vendor should not charge you for 24x7x4 service if you require next business day service (NBD). Nor should a vendor charge for a two-hour response time if in fact they can only offer a fourhour response. Will your vendor customize a plan for you, or can you buy only the plans that they offer? 2 Operating System and Server Virtualization Solutions: 3 Vendors should offer these services as part of either a maintenance contract or a stand-alone service. Many issues often relate to the operating system or VMware, and a support engineer trained on both hardware and software can save you valuable time and money. Legacy Systems Support: Many proprietary applications still run on older systems. Your ISO must have experience maintaining these legacy systems and extending the life of your legacy applications even when the manufacturer will no longer support the system. 4 5
7 5 Geographic Coverage: Does your ISO possess the resources to support all of your locations? Can it meet its SLAs? Does it have national and international geographic reach for your specific equipment? Spare Parts Availability: Does the ISO engineer arrive equipped with the parts needed to fix the problem? Does the ISO stock parts locally, will it potentially need to order replacement parts? Also assess the length of time the ISO requires to send emergency parts, and if it will guarantee this time period. in writing. Critical Response Time: 6 7 You should expect your ISO to offer you telephone response times of thirty minutes to an hour, followed by onsite service within four hours if necessary. For more economical service, you should require a next-day response. Single Point of Contact/Call Escalation: Will the ISO designate one individual to be responsible for your agreement? If your company runs a program that one person cannot address to your satisfaction, is there an established escalation process? 8 Ticketing System/Quality Control: 9 Does your vendor offer a convenient and navigable system via phone, e- mail, and portal to open a trouble ticket? Does the vendor follow up after a service call to make sure your issue is resolved? Your ISO should offer IT Lifecycle Management services from start to finish, including asset procurement, logistics, receiving, integration, imaging, deployment, data destruction, secure decommissioning, off-line IT asset management, and auditable recycling services. 6
8 Including these criteria in your evaluation of any ISO will ensure that you select the company most qualified to meet your requirements in a timely and cost-effective manner. THE BENEFITS OF AN ISO Companies that have improved response time while reducing costs up to 60% by employing an ISO: Semiconductor Manufacturer A semiconductor manufacturer needed support for legacy IT servers being used in a production environment. The OEM had discontinued support of these products and offered no 5 alternative besides a costly hardware and software upgrade. Their new ISO not only possessed the resources to support this equipment, but also improved SLA time in order to meet its customer s round-the-clock requirement. The company also received operating system support as part of a package that included onsite engineering, unlimited parts replacement, and help desk support. Oil Pipeline Company A large oil pipeline company needed maintenance services on one of their facilities that operates on 7x24 hour basis in a remote area of the country. The OEM the customer employed could only provide coverage from 9am to 5pm, Monday through Friday. In addition, the customer would wait on hold for up to an hour when placing a service call. If the call was placed on Monday after 5pm, the OEM would not provide service until Wednesday not ideal for a company with a twenty-four-hour operation. Their new ISO consolidated multiple OEM contracts into a unified contract with a single expiration date, and allowed the customer to generate a trouble ticket via online portal, , or phone. The four-hour onsite response seven days a week, twenty-four hours a day empowered the company to improve operations and increase profits. Government A government organization required trustworthy engineers who would be approved by their security department to service their storage arrays in a cost-effective fashion. They turned to an ISO for specially certified engineers to work on their equipment, and found an organization whose 7 7
9 employees had the technical skill sets to solve their problems while meeting strict background checks and security requirements. A maintenance contract with a quality ISO allows you to take an aggressive approach to your management plan, empowering you to customize a technological solution that fits your specific needs. Instead of dealing with multiple decentralized vendors, you can choose just one, while also opting out of manufacturers escalating maintenance fees. In short, you cannot rely solely on manufacturers to support your IT infrastructure. Savvy CFO s and IT managers know that employing an ISO can improve service while cutting costs, providing 21st century companies the support they need in a globalized world. Written by Joel Nimar For questions or comments, reach out to Joel Nimar at or (978) Pyramid Technology Services is your one-stop shop for innovative IT solutions and services. About Pyramid Technology Services Pyramid Technology Services has 25 years of experience providing innovative technology solutions for your IT. We provide hardware maintenance, spare parts, and new and refurbished systems that will extend the life of your technology, with a special focus on legacy equipment. For more information visit 8
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