Technology Hardware Maintenance-Acquiring and Managing Cost Effective Service

  • Written By: P. Hennigan
  • Published On: October 24 2000



Introduction

Who likes getting their car serviced? No one does, but the need for dependable transportation requires us to maintain our cars. A similar situation applies to maintaining a portfolio of technology hardware. The business depends on its reliability, so we must maintain it. This article focuses on how an organization acquires and manages that maintenance service cost-effectively.

Identify the Enterprise Portfolio

The first step in developing your maintenance options is to gather data on your existing hardware portfolio and how it is maintained. This should be done across the entire enterprise and include all the technology hardware.

A useful approach is to consider a simple framework for organizing your portfolio data. That framework can vary based on an organization's operations, but a generic framework is outlined below:

  • Data Center Environment

  • Distributed Environment

  • Print Shop

  • Telecommunications

Organizations often view their hardware maintenance picture in stovepipe fashion. Different managers may own the operations of the different environments, so maintenance views are often of just a specific environment. This presents two problems:

  • No one in the organization gets a comprehensive picture of total maintenance costs.

  • Opportunities to leverage or consolidate service providers are not considered.

An organization can avoid these problems by creating a high-level enterprise view of their hardware portfolio maintenance. That view consists of a simple table that presents several pieces of high level data that provide an effective summary of the maintenance picture.

Table 1.

Portfolio Data
Data Center
Distributed
Print Shop
Desktop
Telecom
Inventory          
Maintenance Provider(s)          
Tenure of Provider(s)          
Annual Contract Value          
Annual T & M Cost (if any)          
Contract Term          
Contract Exp. Date          
Contract Terms & Conditions          
Service Levels          

Most of the table's data items are self explanatory, but a few warrant description.

The inventory data in this view would consist of some high level numbers such as the number of devices (e.g., # of PCs, # of RS6000s) or capacity (e.g., 2 terabytes of DASD). However, it is essential that detailed inventories exist behind those high level numbers. The operational manager of each environment should have a dynamic inventory that reflects the ongoing impact of procurements and retirements. A complete and accurate inventory will position the organization to get the best pricing from maintenance providers.

The contract terms and conditions data element appears on the table because the organization should document whether it has consistent terms and conditions across all of its maintenance service contracts. Best practices advise organizations to develop a standard maintenance service contract and use it as the basis for all maintenance service transactions. At a minimum, this data element should document whether the maintenance contracts reflect the use of the organization's standard contract or the use of a vendor contract.

Analyze the Enterprise Portfolio

The next step is to analyze your current maintenance portfolio. That analysis should occur at an enterprise level. That perspective should consider the following questions:

  • How many maintenance providers do we currently have?

    If an organization hasn't been reviewing its maintenance picture from an enterprise perspective, it tends to accumulate a variety of maintenance providers that rivals their variety of equipment. Several large maintenance providers will service a wide variety of equipment, and will offer more competitive pricing if presented with a larger portion of the total maintenance business.

    You should also consider consolidating portions of your maintenance business under a single provider regardless of who actually delivers the maintenance service. In this scenario the single source provider manages the service delivery, but may source some service to third parties. The advantages to the organization are a single point of contact, consistent service delivery, and more competitive pricing due to the larger volume.

  • Does the same maintenance provider service different portions of our portfolio?

    The service provider market is very competitive. Consider putting your significant service contracts out to bid on a regular basis. In most cases, annual contract bidding on significant contracts is too disruptive to the operations of both the service provider and the client. However, bidding out contracts every two to three years ensures competition and keeps the organization abreast of changes in the marketplace.

Develop Service Strategies

Based on the analysis of its current maintenance picture, the organization should determine what strategies to pursue. The enterprise analysis could result in strategies that generate cost reductions that are realized within a short time frame. These strategies could include the following:

  • Consolidation of separate maintenance service contracts into a single, larger contract.

  • Revision of existing service levels.

  • Removing non-critical equipment from contract maintenance.

Implement Service Strategies

As the organization develops service strategies it should also begin to outline an implementation plan. In most instances, the most significant implementation activity accompanies the consolidation strategy. The major part of this activity encompasses the process of identifying, evaluating and selecting a service provider.

That process consists of four major steps:

  • Developing the Request for Proposal (RFP).

  • Developing the Evaluation/Selection Decision Matrix.

  • Executing the RFP process.

  • Negotiating the transaction.

Developing the Request for Proposal (RFP)
Successful development of a hardware maintenance RFP depends on two major tasks: gathering a complete and accurate hardware inventory and clearly defining your required service levels. As stated earlier, the inventory positions service providers to provide their best pricing. Complete and accurate inventory data should minimize the contingency buffer the service providers build into their pricing.

Clearly defining your required service levels is an obvious step, but often poorly executed. The requirements should be presented in a clear, succinct fashion and the service providers should respond in a similar fashion. The best way to ensure this is to present your requirements in a tabular form and provide a small number of standard response choices. A three option choice (e.g., Fully Meet, Partially Meet, Can't Meet) usually will suffice. You should also include space for the respondent to provide a detailed response, but this format will usually limit those to the requirements with a 'Partially Meet' response. The objective is to avoid asking for and getting long narrative responses that may waste time and be unclear. The added benefit of this approach is that once you move to the contract negotiation stage, you can simply make this table a contract appendix item.

If your organization has a standard maintenance service contract, it is useful to include it in the RFP and require the respondents to provide a marked up contract with suggested changes. This will complete a step that you will otherwise have to execute in the negotiation phase.

Developing the Evaluation/Selection Decision Matrix
Prior to distributing the RFP, you should develop a decision matrix that will serve as the basis for evaluating and selecting your service provider. It is important that everyone with a stake in the selection agree with both the criteria and weighting reflected in the matrix. This will make the selection process run as smoothly as possible. Also, it is important to develop the matrix before distributing the RFP. Often times, development of the matrix may result in the rethinking of portions of the RFP.

Executing the RFP process
You should run the RFP process as a project with milestones and timelines established. Those milestones may vary depending on your specific situation, but as a general guide they should include:

  • Due date for respondents to submit questions on the RFP.

  • Date, time and place for respondents' conference where you answer all submitted questions.

  • Due date for RFP submittals

  • Date when you identify short list of service providers (two to three).

  • Dates for negotiation sessions with service providers

  • Date for final decision

Negotiating the Transaction
Once you've narrowed the field to a short list of service providers (probably two to three maximum) you need to schedule contract negotiations with each of them. Schedule those negotiations at your site, allow enough time to complete the deal (usually two to three days), and require that the service provider bring the appropriate decision-makers to the table.

The negotiation will be the first time the promises either become real or fade away. The results will drive your ability to effectively manage the service provider. Don't skimp on the time and effort you put into this step. Ensure that you have the resources and support you need to conduct the negotiation effectively.

Conclusion

Hardware maintenance can represent a significant information technology cost, but options for managing that cost exist. If you analyze hardware maintenance from an enterprise perspective, you will identify those options and ensure the cost-effective delivery of those services.

About the Author

Peter E. Hennigan
Mr. Hennigan's experience includes more than twenty years in analytical, sales, financial and IT roles. As a Principal with Technology Contract Solutions (TCS) Mr. Hennigan focuses on helping clients minimize the risk and cost associated with their technology acquisitions. His recent experiences have included the financial analysis of a data center relocation for a major brokerage house, an analysis of the data center hardware and software contract portfolio for a large Midwest healthcare, the negotiation of a multi-year hardware break/fix contract for a large Northeast insurance company, and the development of an application development services agreement for a Northeast financial services company.

Mr. Hennigan has over ten years in senior management positions in the Information Technology Department of the Liberty Mutual Group, a Fortune 100 financial services company. Mr. Hennigan holds a BS in Civil Engineering- Magna Cum Laude and an MBA from Syracuse University.

Mr. Hennigan can be reached at:
phennigan@technologycontracts.com

 
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