COUNTERCYCLICAL STRATEGIES FOR MANAGING OUT-OF-WARRANTY HARDWARE
When economic realities dictate Information Technology (IT) budget cuts at Small and Medium Businesses (SMBs), the rosey idea that you can simply replace hardware is no longer on the table.
According to Spiceworks Ziff Davis “The 2022 State of IT” report: “…end-of-life as a purchase trigger has come down to Earth in the last two years — falling from 62% in 2020 to 54% in 2022.” That translates into SMBs extending the life of IT assets that are increasing going out of warranty. In fact, the same study in 2020 declared that approximately 61% of technology assets for SMBs are past end-of-life (EOL).
Cyclical versus Countercyclical
A cyclical Managed Services Provider (MSP) strategy would be to replace the old IT assets at the EOL cycle with a refresh. The opposite of this would be a countercyclical MSP strategy whereby the SMBs out-of-warranty assets would be extended via Alternative to OEM Maintenance (AOM) extended warranty consumption. In the past this was known as third-party warranties of third-party maintenance (TPM).
In the light of IT budget pressures caused by challenging economic conditions unimaginable just a few years ago, SMBs are hardly in the mood to engage in big refresh cycles. Basically, MSPs have to do more with less and are experiencing more pain points.. The good news is AOM has come to the rescue. For a fraction of the cost of an upgrade cycles, MSPs can use AOM consumption to keep business continuity intact by keeping mature IT assets in service.
Out-of- Warranty Hardware and the Reactive Threats
Not surprisingly, it’s not uncommon to delay hardware refreshes and have warrant coverage expire to save costs.
A deeper dive would suggest the opposite. It’s no secret that outdated IT network equipment is expensive to maintain, there’s lower Customer Satisfaction Scores (CAST), there is not a great MSP revenue opportunity. Add security concerns because outdated equipment is prone to security vulnerabilities to the mix. Add more frequent and recurring technical problems to the mix. Thus MSPs have additional responsibilities for these legacy matters while clients are faced with the increased of downtime. Incurred costs inflate with increased amounts of time and labor involved in conducting an onsite visit (rolling a truck), having to source all of the parts (especially with supply chain shortages), and a lengthy procurement process. Once thought of favorably,, servicing out-of-warranty hardware quickly becomes a liability to the well-being of MSP operations and clients.
How MSPs & Clients Benefit from Extending Warranty Service Coverage
Let’s talk automobiles as an analogy to technology assets. When it comes to replacing automobiles that are past it’s useful end-of life, many drivers will say that they can’t afford it or that they want to save their money. It’s the same mindset with IT assets such as hardware.
While it might not be the best time to replace hardware, third-party warranties provide a budget friendly solution that are a win-win for both MSPs and their clients. And did you know that third-party warranties are just as reliable and offer the exact same benefits as OEM warranties.
With clients eager to get the most up-to-date equipment, hardware made up 35% of IT budgets, making it the largest IT budget allocation for the SMB market