Ebook_Rethinking Your IT HM Strategy_31 July 2017_v1

1. Rethinking Your Information Technology Hardware Maintenance Strategy Noah Myint Head of Sales & Marketing "TPM contracts will offer customers an average of 60% savings off of OEM support list prices. However, depending on equipment type, location and product density, Gartner has seen that the range of savings with TPM contracts is 50% off OEM list up to 95% off OEM list." - Gartner ITSM Corp. is a global leader in IT Infrastructure Management services. Office Address: Unit 18, 1 Talavera Road, Macquarie Park NSW 2113 Visit us at www.itsmcorp.com

2. Introduction Based on Forrester’s study, companies spend an average of 72% of their IT budget for keep-the-lights-on (KTLO) activities, leaving only 28% for new projects. KTLO is that portion of IT expenditure used for performing daily operational tasks and for routine IT systems or hardware maintenance. Although KTLO is necessary, from a business perspective, it does not contribute directly to business growth. Organisations spend more on IT support and maintenance rather than improvement and innovation. KTLO is expensive, and for most organisations, it is lower on the list of priorities as global competition demands more spending on innovation and business growth. Companies spend an average of 72% of their IT budget for keep-the-lights-on (KTLO) activities. That leaves only 28% for new projects. 2 Rethinking Your IT Hardware Maintenance Strategy

3. Why do lT leaders need to rethink their IT hardware maintenance strategy? KTLO is what keeps IT functioning and preventing it from breaking down. A portion of KTLO expenditure goes to hardware maintenance, which includes both preventive maintenance and remedial IT services. This could involve physical repair or hardware optimisation. Surveys conducted by Gartner and Forrester shows an average 70% to 85% business spending for KTLO activities. ITSM believes it should be less than this. In fact, we believe it should be no more than 50%. This is confirmed in studies done by Rita Gunther McGrath, Columbia Business School professor in her book “The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business.” KTLO is what keeps IT functioning and preventing it from breaking down. 3 Rethinking Your IT Hardware Maintenance Strategy

4. Looking for ways to free up resources. From a business perspective, organisations want to spend more time and resources on innovation and other strategic initiatives, rather than keep-the-lights-onactivities. Until companies find options to free some of their KTLO resources, the IT department will continue to experience budget cuts as means to reallocate funds to other business priorities. Alternatives to expensive OEM hardware maintenance support. OEM maintenance contracts can be costly, and tends to get more expensive as equipment gets older. At a certain point, vendors will no longer support the product, declaring it obsolete. Unless businesses can find an alternate and cost-effective maintenance solution, they will be forced to discard the equipment and purchase a replacement. However, cost-efficient alternatives to OEM hardware maintenance, which is better than the traditional IT practices, is available. 4 Rethinking Your IT Hardware Maintenance Strategy

5. Doing more with less. The current business economic landscape, in addition to the demands for innovation and business growth puts pressure on IT departments to increase the services they deliver while keeping costs down. Many IT leaders are faced with the challenge of how to spread the funds over a variety of items, forcing them to think of other options, or how to do more with less. Infrastructure and operations teams are compelled to review hardware acquisition process, refresh cycles, and hardware maintenance and IT support services. Significant cost savings can be achieved when the organisation focuses on maintenance contracts and refresh cycles. IT leaders should consider the following: • Is the value of the business’s IT investment being maximised? • Is the organisation’s hardware maintenance and IT support services fully utilised? • Are there cost-effective alternatives to expensive OEM maintenance contracts? Significant cost savings can be achieved when the organisation focuses on maintenance contracts and refresh cycles. 5 Rethinking Your IT Hardware Maintenance Strategy

6. Current IT landscape Although, hardware maintenance is important, it is considered as "non-strategic IT" spending. It does not directly contribute to business growth but takes much of the IT budget. Hence, IT leaders are being pressured to find practical and low-cost options to expensive OEM hardware maintenance contracts so the enterprise can allocate that savings to other important areas of the business. Hardware maintenance contract When businesses purchase new IT equipment, typically they also purchase maintenance contracts. In many cases, equipment manufacturers bundle maintenance agreements with the purchase. The issue is that many IT decision makers purchase OEM maintenance contracts without knowing what it includes and its value to the business. Since the new equipment is in its optimal condition, hardware maintenance and IT support are also minimal. Capabilities of the OEM support are rarely explored, leaving it under-utilised. For example, some vendors provide R&D engineering access, which many organisationsare unaware of. Although, hardware maintenance is important, it is considered as "non- strategic IT" spending. 6 Rethinking Your IT Hardware Maintenance Strategy

7. Legacy equipment However, most of the equipment still carries market value and has 20-plus year mean time between failure (MTBF) life cycles. Vendor-driven refresh cycles often mean that companies retire and replace existing equipment prematurely. As IT equipment matures, the OEM hardware maintenance support declines and tends to get more expensive. In many cases, the cost of maintaining legacy hardware can be as much as the price of new equipment. The vendor ceases supporting your end- of-life (EOL) products. Thus, organisations are forced to buy the latest equipment, along with the accompanying maintenance contract. Thus, the cycle repeats. According to Forrester, up to 79% of organisations refresh their wired networking infrastructure every five years. The refresh cycle is guided by the industry that originates from manufacturers. 7 Rethinking Your IT Hardware Maintenance Strategy

8. Organisations can make considerable savings by reviewing and rethinking their hardware maintenance strategy. Recommendation OEMs influence IT purchasing decision, and even dictate the industry standards. Businesses need to look into the value of their IT investment and create a strategy based on specific requirements. Organisations can make considerable savings by reviewing and rethinking their hardware maintenance strategy. ITSM Corporation recommends the following: 1. Map out your IT infrastructure 2. Review of the Service Level Agreement (SLA) A complete view of the enterprise’s infrastructure allows the IT department to take an inventory of its IT assets and provides comprehensive information of the entire network. Companies often follow status quo when renewing maintenance contracts, but business needs change over time. It is recommended that organisations review Service Level Agreements (SLA) to ensure current business needs are met. With a visual understanding of the network topology, your IT team can easily identify possible choke points and help you troubleshoot when an issue comes up. 8 Rethinking Your IT Hardware Maintenance Strategy

9. 3. Know and explore your options It is recommended that organisations review their existing IT assets, and ensure they are fully utilised and consider cost-saving options for IT hardware maintenance. Some third-party hardware maintenance vendors have been found to provide the same levels of support for both new hardware and legacy equipment at 50% less than OEM price or more. Working with third-party maintenance (TPM) provider minimises the various hardware maintenance challenges and reduces IT labor costs. Tasks such as installation, testing, and inventory are now being outsourced. This frees the IT team from the daily operational tasks and allows them to focus on innovative and strategic projects. Third-party hardware maintenance is ideal for mixed IT environments as they provide support for EOL (end-of-life) and EOSL (end-of-service-life) equipment. As most TPMs are vendor agnostic, they can very well support various OEM products. TPM providers help enterprises achieve cost savings and offer a more flexible and customised IT support. 9 Rethinking Your IT Hardware Maintenance Strategy

10. Case Study A manufacturing company in Australia have a variety of networking and data centre equipment from Cisco. They have also invested a good amount of money for Cisco SmartNet to get their hardware maintenance and support in case of failure. In return, the company gets notified every time Cisco has security recommendations, device updates and software updates. IT never had any complaints about the Cisco support services. However, the company plans on implementing a company-wide IT project which requires a huge budget. Now, budgets are being cut across the board to make room for the new initiative. To lessen the blow, the IT Director reviewed the IT budget and identified what department spending they can cut back. He learned that the department is spending more on hardware maintenance specifically for their Cisco equipment. The current situation prompted the IT director to seek for cost-efficient ways on their hardware maintenance, which led him to ITSM Corporation. ITSM pointed out that what their company is getting from Cisco is only technical support when issues come up, which they can get from third-party hardware maintenance provider at half the cost they are paying Cisco. The company is also not taking advantages of the Cisco Technical Assistance Centre (TAC) that allows them access to research and development engineers because they never had a need for it. For their end-of-life (EOL) products, similar with other equipment manufacturers, their company would not be able to get the maintenance support they need from Cisco. By analysing what the company gets from Cisco SmartNet, the cost outweighs its benefits. 10 Rethinking Your IT Hardware Maintenance Strategy

11. Case Study ITSM recommended choosing the appropriate support from Cisco. For hardware maintenance, ITSM explained that whether their organisation decided to purchase new Cisco equipment or intend to keep their old gear, third-party maintenance vendors like ITSM can provide them with the same levels of network support as Cisco Smartnet, or even better. The company decided to work with ITSM, not only for their Cisco equipment but also for their other networking and data centre hardware. TPMs like ITSM are vendor agnostic, which means they can provide hardware maintenance services to different manufacturers. They can, for example, provide EMC Hardware Maintenance Services, IBM Server Hardware Maintenance Services, and HP Blade Hardware Maintenance Services, and among others. The company realised that they can save more than 50% of their tech budget by working with a TPM provider. Want to cut your KTLO by 50%? Schedule a free consultation. SIGN UP NOW 11 Rethinking Your IT Hardware Maintenance Strategy

12. About ITSM ITSM delivers comprehensiveInfrastructure Management Services and Cloud Solutions for companies and institutions, increasing user productivityto access applications and computing resources. Our product portfolio empowers grid computing and cloud infrastructure by increasing usability and user-friendliness, without sacrificing flexibility and control. ITSM Australia Unit 18, 1 Talavera Road Macquarie Park NSW 2113 Australia Telephone: +61 2 8355 1080 Fax: +61 2 8088 7318 Email: sales.au@itsmcorp.com ITSM Philippines Unit 305, 3F Astron Bldg. 102 E. Rodriguez Jr. Ave. (C5) Pasig City, 1604 Philippines Telephone: +63 2 477 3930 Telephone: +63 2 576 9551 Fax: +632 857 2341 Email: sales.ph@itsmcorp.com ITSM New Zealand Suite 1, 2 Kingsland Terrace Kingsland Auckland 1021 Telephone: +64 9887 0324 Email: sales.nz@itsmcorp.com