Should Your Business Consider Using TPM?
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Third-party maintenance (TPM) is a model of hardware support for IT assets, including server, storage, and network equipment. The market for this service has matured substantially over the past decade owing to two main reasons:
First and foremost, the ballooning cost of technology expenditures. A 2020 Flexera survey found that companies are spending an average of 8.2 percent of revenue on IT. CTOs at these firms are under tremendous pressure to reduce these expenses and extend the operating lives of their tech assets.
Which brings us to reason number two: modern tech equipment is quite durable and can function effectively for years and years. But manufacturers limit their service support for a limited window, in part so they can push for pricey replacements. (Like how your mobile provider is also telling you it’s time to upgrade your iPhone.) As such, there’s a huge market for providers who can service equipment, no longer supported by the manufacturer.
Both of these factors explain why third-party maintenance has emerged as such a promising service option. This piece will break down exactly how TPM works, detail some important pros and cons, and identify situations where TPM can really save you money while providing superior service.
What is third-party maintenance and why does it matter?
We’ll answer this question directly, but first a quick bit of history.
Third-party maintenance as a service model dates back to the 1960s, as major computer manufacturers (namely IBM) were reluctant to service systems that included hardware components they hadn’t produced. Two other factors contributed to the model’s growth: the U.S. government began buying rather than leasing computer equipment and manufacturers began following IBM’s lead and “unbundling” service offerings.
TPM really began to flourish in the 1980s, as more and more large companies were creating in-house computer networks and seeking out independent providers to service them. One of the early leaders in the space was Sorbus, which employed 2,200 people and generated $118 million in revenue when it was acquired by Bell Atlantic in 1984.
The same dynamic that produced companies like Sorbus in the 1980s still exists today, and if anything has been amplified. Large organizations that require substantial amounts of IT equipment—think servers, computers, data storage devices, routers, etc.—continue to purchase directly from manufacturers (like Dell, IBM, or Cisco), who offer discounted prices for bulk sales. In the industry, these sellers are known as original equipment manufacturers (OEM).
The purchasing agreements from OEMs typically offer a service level agreement (SLA) that provides some level of maintenance during the duration of the warranty and even into a post-warranty period. This is so-called OEM maintenance, and it’s pretty much the default service option for organizations large enough to purchase enterprise IT equipment.
Just like in the 1960s, third-party maintenance (TPM) is an alternative to OEM maintenance in that it involves support from an independent service provider (hence “third party”) who can offer a similar level of maintenance and tech support beyond the parameters of a strict warranty agreement.
Why would a business consider using TPM instead of OEM service?
Well, let’s consider what OEM maintenance is actually offering.
OEM maintenance is essentially factory service from a technician who knows the equipment inside and out and only uses OEM parts and components that align with the warranty standards. Which sounds great, right? And it certainly can be, but if you’ve ever had your car serviced at the dealership, you know the drawbacks to this model. It can be hard to get maintenance scheduled exactly when you need it, and service tends to be pretty expensive exactly because they’re only using factory-approved parts.
Which brings us to TPM.
Third-party maintenance offers several key benefits:
- Lower maintenance costs: The lower costs associated with TPM come from flexibility: TPM providers can create service level agreements tailored around your specific budget and needs, and generally offer much lower pricing on maintenance service for big tickets and small tickets alike. This is especially true for older equipment, which OEMs often charge more to service.
- Longer hardware life: OEMs often force customers to upgrade their equipment as soon as it reaches so-called end-of-life (EOL) or end-of-support (EOS) status—basically meaning that it’s no longer under warranty. But just because your SLA has expired doesn’t mean the equipment is no longer working. TPM can provide full service in these circumstances, including replacement parts and technical support. This can help you avoid expensive capital expenditure upgrades every 3-5 years.
- Cohesive service: TPM providers can service equipment from different manufacturers, which means you can have a single contract for all of your hardware, rather than negotiating with multiple OEMs. Having one point of contact for all of your maintenance needs can be a huge relief!
- Personalized touch: OEMs are all large companies and it can be hard to get through to the right person to address your issues. TPM providers, though, are typically smaller operations where you’re going to be working with the same people again and again. When a big problem pops, would you rather be on the phone with someone you know and have dealt with before, or a random customer service rep?
The through-line for all of these benefits is problem-solving. The market for third-party maintenance developed as a direct result of frustrations clients were having with OEMs. TPM providers have addressed those concerns with solution-oriented customer service.
When does it make sense to use TPM? And when should you stick with OEM service?
Companies often have some uncertainty about TPMs, especially about how the level of service they provide will differ from what they’re accustomed to with an OEM. Though many of the concerns we hear are overblown or rooted in misperceptions, there are certainly some scenarios where OEM service is going to provide a better fit—and other scenarios where a hybrid maintenance model (a mix of OEM and TPM contracts) will be your best option.
Here are some common objections we hear along with a few other relevant variables that should guide your decision-making:
- Software support: Many TPM providers specialize in hardware support and offer only limited software support. So once you switch to TPM the manufacturer is going to stop providing patch updates that keep your software and firmware up-to-date. This isn’t going to impact functionality for most equipment—but if you do have machines that require software updates on a methodical schedule to operate efficiently, then TPM may not be an option for you. It should be noted, though, that most software and firmware development occurs in the first few years after a product is released. After that, updates are going to be less frequent and likely less critical. And once equipment reaches its manufacturer-designated EOL, you’re going to see little-to-no new software or firmware development. Which is to say, “limited software support” can be something of a red herring in discussions about older IT assets.
- Hardware expertise: TPM providers should be able to clearly identify the hardware that they do and (just as importantly) do not support. If they tell you they can support “everything” that’s usually a red flag that they aren’t being completely transparent about their capabilities. You should likewise press for details about their engineers’ expertise, experience, and certifications, especially as it applies to your hardware set-up.
- Pricing: A leading industry analyst report suggests you can save 50 to 70% on maintenance costs from net OEM support prices. That’s in part because while OEM maintenance is very affordable during your initial contract, the prices skyrocket up considerably after that. So if you’re talking to an OEM representative, be sure to inquire about how maintenance prices will change once you reach the end of your contract or warranty period.
- Parts availability: Network problems can be devastating for a company, so it’s important to know how quickly a TPM provider can replace parts and how that compares with OEM service. In most cases, the times are going to be comparable.
- Regulatory compliance: Some industries have rigid compliance requirements that will impact hardware, software, and network needs. Financial institutions, for instance, must meet PCI, EI3PA, or GLBA compliance requirements, which means (amongst other security factors) maintaining a robust firewall, ensuring all critical systems are patched and updated to the most recent versions possible, and any vendor-supplied defaults for passwords or other security parameters. So if you’re in finance, any TPM you work with needs to guarantee that they can help you meet these requirements with no hiccups.
Some OEMs will suggest that working with a TPM puts your assets and business at risk, but that’s obviously not true. You should also ask questions, though, about the specific level of service you’re going to need. As noted above, one benefit of TPM is that providers can often create contracts tailored to your specific needs and budget.
Have more questions? Please don’t hesitate to get in touch.