Why an OEM maintenance contract isn’t always the best option

Posted on April 20th, 2020 by Joel Nimar


OEM maintenance contracts may lose their initial appeal rather quickly, leaving companies to pick up the tab on expensive hardware repairs.

Sometimes going straight to the source isn't the best way to address a problem. While you might assume that manufacturers are best equipped to deal with issues with their own equipment, it’s often not the case. When you remember that most of the systems in the data center are connected to and must communicate smoothly with other machines from other brands, the weakness of a single OEM servicing their own systems becomes more clear. if you’ve ever experienced the common support event where the Server brand blames the storage brand and the storage brand blames the network brand, you have firsthand knowledge of the issue – and probably had to waste we time with all three support systems and three different service tickets to boot.

The shortfall of OEM support is especially true when working with expensive and complex data center hardware. Original equipment manufacturers can make hefty promises regarding hardware upkeep and repair, but if you dig a little deeper into your OEM maintenance contracts, you will likely come across more than a few red flags.

Maintenance costs add up quickly

Ongoing maintenance expenses can eat up a big chunk of an organization's IT budget. In fact, ZDNet's analysis of a recent Computer Economics survey revealed that operational budgets have steadily increased while other IT expenditures like hiring new employees have tapered off. Two-thirds of respondents reported that they would be ramping up their operational spending in 2018 to keep pace with their needs. Even with that increase in 2018, more than half of the study's participants went on to say that their current operational budgets remain insufficient to support business demands.

How much does it cost to just keep the lights on? According to Forrester, as much as three-quarters of a company's IT budget may be devoted to maintaining baseline operational performance. That leaves very little room for more innovative and strategic IT projects. It can be very easy for organizations to become buried in operational expenditures, putting out fires and struggling to keep business going. When urgent issues are outpacing important ones by three to one, its no wonder most IT teams describe themselves as falling further behind compared to where they were a year before.

"OEMs are notorious for ramping up maintenance costs."

OEM savings may be misleading

With so much money tied up in data center hardware, businesses often look to their OEMs to handle maintenance needs and keep their equipment running smoothly. Many are enticed by the seemingly low cost of entry offered by OEMs, with initial manufacturer warranties and competitive pricing. However, it's important to read the fine print in any maintenance contract and fully understand how those costs and service levels may fluctuate down the road.

OEMs are notorious for ramping up maintenance costs from year to year. As Data Center Journal contributor Kayla Matthews explained, OEMs have a vested interest in rolling out new iterations of their products on a regular basis to address potential security issues and protect their brand's reputation. That sounds perfectly fine on paper, but in action, it means customers are forced to adopt the latest updates and the increased costs that go with them. That early low price point can become a thing of the past very quickly, and you may be forced into additional hardware spend long before achieving the 3 to 5 year ROI of your original projections that led you to buy the hardware and service package initially.

Those expenses may be even more eye-popping if the upgraded equipment is incompatible with some existing components, requiring further investments in an organization's IT infrastructure.

Vanishing Act: When OEM support goes up in smoke

Another issue to be aware of is how OEMs handle end-of-life equipment, especially in terms of support. In most cases, manufacturers are unlikely to continue supporting hardware that has been phased out of production. From a business standpoint, it's completely practical – why spend resources maintaining outdated equipment when your organization is focused on the next generation of hardware?

Add to that the very real possibility that the OEM itself may cease to exist in its current form. Mergers and acquisitions are common, but the contractual fallout creates headaches and uncertainties. Brands have much more of an interest in growing the acquired user base into new products and new revenue streams than in mining pennies on the dollar from their acquired brand’s old catalog.

Companies that aren't quite ready to move away from their existing network or data center setup may be caught in a bind, however. They may not have the budget to invest in new equipment, but the alternative is relying on a technological foundation that lacks any kind of safety net. If something breaks down and needs repair, your OEM won't be there to help. Fixing IT equipment on your own will be an expensive proposition, and many organizations simply won't have the budget to cover such unexpected costs. The nightmare scenario, in which a company assumes it has coverage only to find it doesn’t, and now it must go find a provider for a system that’s already down, still happens far too often even in otherwise sophisticated and leading-edge data centers.

vanishing-act

OEM support can vanish without warning.

Third party vendors offer maintenance relief

Instead of relying solely on an unmanageable stable of different OEMs for single-brand hardware upkeep and repair needs, consider working with a third-party maintenance partner. TPMs are more likely to offer support across brands and across lifecycle stages, allowing companies to continue using their perfectly good legacy hardware until the time is right to make an upgrade. Businesses can see even greater ROIs on equipment over the long term, extending their available IT budget because they're not on the hook for any repairs and they don't need to invest in shiny new equipment because an OEM dropped support for their legacy infrastructure.

Another key benefit to working with a TPM is you get one point of contact for all of your maintenance needs. Organizations that rely solely on their OEMs for support have to wrestle with different maintenance contracts from various brands and products across a large swath of facilities. Managing all of those contracts can be an immensely time-consuming process. Working with a TPM simplifies contract oversight and makes it far easier to determine coverage and make repairs when necessary.

At the end of the day, TPMs provide a headache-free way to manage your maintenance contracts and ensure business-critical machinery continues functioning with optimal uptime.

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