Unless hardware maintenance providers broaden the range of services they offer, position their products correctly and market them right, they will not succeed in today’s hardware market, which is dropping in value more rapidly than previously predicted. These are the findings of market research group International Data Corp in a report entitled The Hardware Maintenance and Customer Service Market 1992 – Strategies in a Time of Crisis. After questioning 600 non-information technology senior executives and 90 information technology ones in the UK, researcher Graham Browne concluded that hardware maintenance is not the low growth service that people previously thought it was. It is, rather, a mature market that is in decline. Browne reckons that the value of the UK hardware market will fall 28% in real terms by 1994, which means that vendors that have traditionally relied on maintenance as a key cash generator will be forced to act rapidly to avoid crisis. As suppliers base the price of the maintenance services they offer on the retail value of their kit – generally between 8% and 10% of costs – this trend will have a negative impact on suppliers’ profits. And customers will, in future, spend a smaller percentage of their budget on such a service. Other factors contributing to the situation include first, the increased reliability of equipment on the market. Second, the commoditisation of hardware, which means that maintenance is no longer the critical service it once was – if something goes wrong with a relatively cheap personal computer, for example, people have the option to simply bung it in the bin without wasting too much money. Third, the market has become more competitive. In the past, manufacturers had a captive market. So they often set up subsidiaries, which earned maintenance revenues on the back of mainstream hardware sales. Since the advent of third party service companies, however, price competitiveness has become an important issue. Especially as third parties can generally deal equally well with a range of vendors’ machines rather than just specialising in one type.
Become very efficient
Browne reckons that suppliers can deal with this problem in several ways. First, they could become very efficient by cutting unneccessary costs, although they must maintain quality. Browne cites both Granada Computer Services Ltd and Sun Microsystems Inc as good examples of this policy. Sun, he said, looks at the level of maintenance required and sends the relevant person for the job – if a high level of expertise is needed to deal with a particular problem, then a highly qualified engineer will see to it. But if the problem consists of nothing more than needing to replace a non-key component, Sun will simply send a courier to the relevant site. Or outsource the work if someone else could do it more efficiently. Second, vendors could concentrate on clearly defined niche markets. And third, they could move into more broadly-based, higher value services, like IBM Corp and Digital Equipment Corp. Browne says that what users want is real customer service that supports their business needs. He defines customer services as hardware maintenance, including third party and multivendor maintenance; systems software and utility support; environmental services, such as the design, construction and installation of computer rooms; disaster recovery; operations management support services; and consultancy and training related to the above. But he says, vendors can no longer measure their credibility as a service supplier by the number of services they offer to the market. Rather they must adopt a genuinely market-led approach to the services business. And he believes that the success of two of the fastest-growing markets, network management and disaster recovery, is because they meet clearly-defined business needs. Demand for network management is driven by a customer’s need to control the escalating cost and complexity of networked systems, he says, while the market for disaster recovery is growing as a result of both le
gislation and successful promotion of the service by vendors. – Catherine Everett
