Businesses evolve through organic growth, mergers and acquisitions. Each business that is acquired obviously has an existing data center with unique applications and hardware. Additionally, companies over the past two decades have acquired new technology either to gain a competitive advantage or to reap the benefits of improved applications and products. One result of this evolution of businesses is data centers comprised of hardware from multiple vendors.
Adding to the complexity of data centers is that each vendor usually has different warranty periods, expiration dates and service level agreements (SLAs).
Smart Business spoke with Ted Rieple, executive vice president of Business Development at Park Place International, to learn more about the issues corporations face in managing service contracts for their data center equipment.
What is the environment for corporate IT operations today?
Businesses of all sizes and in every industry are facing unprecedented challenges. They need to reduce costs and deliver increased value to win new customers and to keep their existing customers. Information technology budgets, in particular, have been the target of cost-cutting initiatives.
What these IT departments need are options to improve their operations and reduce costs without sacrificing quality. Ultimately, this economy will rebound, and businesses will want to have that head count available to them for the important projects on the horizon.
What are some of the issues your customers face in managing IT service contracts?
The average Global 1000 corporation maintains more than 40,000 active contracts and this number is growing every day. Most of these contracts are still managed in a traditional manual methodology. These global corporations face numerous issues:
- Lack of visibility into legal and financial risk ‘file and forget’
- Un-auditable paper trail
- Deficient or no proper approvals chain
- Lost profit or revenue opportunities
These same issues apply to the maintenance service contracts for data center hardware. In particular, there is complexity caused by:
- Different vendors’ SLAs
- Warranty expirations
- Over-payment due to lack of flexibility in terms and conditions
Customers need to be able to meet contractual obligations, manage customer and supplier performance against contract terms and language and continually improve operations.
How do companies address these issues?
The majority of companies manage contracts manually, which is a time-consuming and inefficient process. Based on our observations at more than 900 customers, companies frequently have SLAs that do not meet their requirements, have expired service agreements and, in some cases, over-pay for services.
There is a small percentage of corporations that utilize enterprise contract management software to manage the entire contract lifecycle. These software products provide greater control and visibility in the contracts process.
Today, with continuous pressure to reduce costs and improve earnings-per-share (EPS), enterprises are increasingly looking at their supply and contract management processes as strategic levers in pursuit of that goal.
How can a third-party services firm assist with contract management?
A qualified third-party services firm that supports all major original equipment manufacturer (OEM) platforms can provide all your data center hardware services through a single contract. By having a single contract with a single company for all of your maintenance services needs, you can easily track the SLAs, expirations, performance and associated costs. Also, the SLAs can be unique for each vendor platform based on requirements, all from a single contract.
So in addition to providing equal or better service than OEMs at 30 percent to 50 percent lower cost, a third-party maintenance services firm can simplify the contracting process. You will have greater control over your service contracts and be able to efficiently evaluate and track supplier performance.
What advice would you give companies considering third-party maintenance services?
Companies need to select a firm that has a state-of-the-art support infrastructure to provide service that is the same as or better than the OEMs. Look for a company with 24x7 call center support and a global supply chain with access to a robust parts inventory. Some third-party maintenance service firms actually provide parts to OEMs for their service contracts. They have a broader range of sources for parts since they are not bound by the same sourcing process limitations as OEMs.
By virtue of being purely focused on providing third-party maintenance (data center servers, storage and tape back-up), a third-party service firm’s cost structures are lower than that of the OEM’s, which results in lower maintenance costs to the customer.
Ted Rieple is executive vice president of Business Development at Park Place International. Reach him at (440) 991-3104 or Ted_Rieple@parkplaceintl.com.