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