One of the primary revenue engines for hardware and software companies has been their maintenance contracts. For many years, most suppliers and customers took maintenance services for granted. Nearly every time a company bought a product, it also purchased a maintenance agreement that provided added insurance that the supplier would fix any problems that occurred. Until recently, the reliability of many hardware products was uncertain, and software vendors could get away with pushing out a constant stream of updates, making maintenance agreements a necessity.
As hardware reliability increases and the rate of software revisions declines, the need for maintenance agreements has diminished. Product commoditization also has made it easy to simply throw away a broken hardware device rather than fix it. And a growing revolt among companies frustrated with traditional software-licensing arrangements is leading to the unbundling of many maintenance agreements.
The consequences are significant for hardware and software vendors, many of which reap upwards of 75% of their operating income from services, according to the IT Service Marketing Association.
Now the reality of the Maytag repairman syndrome is upon many IT vendors. Their customers increasingly believe they no longer need their maintenance services. To counteract this perception, IT vendors must redefine the meaning of maintenance.
If you ask enterprise executives, end users or IT professionals how they define product quality, they will tell you that a product must be continuously reliable, manageable and secure. Cisco is responding to this by building security features into its networking equipment rather than offering them as add-ons. Hardware and software vendors should do the same with their maintenance agreements by adding manageability and security to their traditional promise of reliability.
How can vendors incorporate these additional elements into their maintenance agreements economically? Via managed services.
Remote access, monitoring, management and security capabilities now make it feasible for hardware and software companies to offer multidimensional maintenance agreements. Instead of just reacting to hardware problems or periodically issuing software updates, vendors can utilize remote services to cost-effectively assume greater responsibility for managing and protecting their products.
This added layer of service also represents a new way of differentiating vendor products in a competitive market. An increasing number of companies are outsourcing to reduce costs and offload the hassles of managing their IT/networking operations. Providing a multidimensional maintenance service can satisfy these IT needs and encourage companies to establish strategic sourcing arrangements with their vendors.
Smart enterprise decision-makers recognize that strategic sourcing arrangements with key vendors can reduce their costs and hassles without the risks of outsourcing. Urging their vendors to provide multidimensional maintenance agreements can satisfy their needs while helping their vendors resolve a key business challenge.