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May 22, 2018 | IN Service Level Agreements | BY Reza Koranki
Network Maintenance Contracts: 10 Questions to Consider

When was the last time you examined your network maintenance contract?

Really?

As a significant portion of most organization’s IT budgets, maintenance contracts deserve the same level of analysis, review, and customization as any other major business purchase.

sla-10-questions-2

However, the complexity of these agreements often leads decision-makers to follow the recommendations of equipment OEMs or merely continue renewing what is already in place.

Why fix what isn’t broken, deal with it next year, right?

The truth is that your network maintenance contract may be broken without you knowing. Network infrastructure rarely remains identical year-to-year; new equipment is added, legacy hardware is removed, configurations change, and system demands increase or decrease. Maintenance contracts that fail to address these changes are, at best, leaking money and at worst, they are a ticking time bomb ready to go off in the middle of a crisis.

David Cappuccio, VP and chief of research at Gartner notes that “organizations need timely, reliable, cost-effective IT maintenance, but they just aren’t getting it.” One reason this occurs is that organizations rely on OEMs to furnish both equipment and maintenance.

In ComputerWorldUK, Glenn Fassett points out the importance of differentiating between the needs of the company and the needs of the OEM, “it’s in the OEM’s interest to keep companies buying products, so they won’t point out areas where savings can be made or recommend alternative methods of maintenance.” Not only does this contribute to costly (and often unnecessary) equipment replacement but it also leads to significant network maintenance contract over-coverage.

“It’s in the OEM’s interest to keep companies buying products, so they won’t point out areas where savings can be made or recommend alternative methods of maintenance.” ~ Glenn Fassett (Click To Tweet)

OEMs guide customers into unnecessary spending in two primary ways:

  1. Requiring equipment replacements to access OEM maintenance
  2. Over covering (or double-covering) existing equipment

Requiring equipment replacements to access OEM maintenance

It is well-known that many OEMs will issue “end-of-life” notices on equipment that is still performing flawlessly in the field. However, these notices allow the OEM to discontinue support of the hardware and is often the reason that businesses replace hardware unnecessarily.

Over covering (or double-covering) existing equipment

This occurs when the coverage provided in the network maintenance contract is identical to that included in the entitled services of the hardware. In other words, the OEM is selling coverage that is already included in the purchase price of the equipment, thereby charging for the same service, twice.

Double- or over-coverage also occurs when the maintenance provider requires the customer to buy lower levels of support to gain access to higher levels of support. For example, your hardware may not need a 4-hour equipment replacement guarantee; however, to gain access to a 24x7 TAC response time, the provider requires the purchase of a 4-hour equipment replacement guarantee. This pricing methodology significantly increases the cost of the contract and forces unnecessary coverage.

Global IT spending is expected to reach $3.5 trillion. - (Click to Tweet)

Well-written and well-managed network maintenance contracts provide organizations with the coverage and protection needed to ensure that their infrastructure supports the demands of the business without exceeding budgetary constraints.  According to CIO, effective contracts “clearly state metrics, responsibilities, and expectations so that, in the event of issues with the service, neither party can plead ignorance. It ensures that both sides have the same understanding of the requirements.”

Network maintenance contracts are defined by three key areas: service, management, and metrics. Service describes what is covered, what is not covered, responsibilities of both the vendor and the client, time-frames for response, resolution, and restoration, and escalation procedures.

Management elements of the contract define dispute resolution processes, indemnification clauses, reporting processes, and a mechanism for updating the agreement.

Download the Top 10 Considerations for Network Maintenance Optimization Tip Sheet!

Specified metrics in the contract define how the performance against the requirements of the contract will be measured and how these defined metrics will change in response to non-compliance and/or changes in the needs of the business.

With all of this in mind, which questions should you be asking to ensure that your network maintenance contract is optimized to meet both your coverage and budgetary needs?

Before entering into contract negotiations, it is essential that you understand exactly what you are covering. Networks are always changing. Business growth, acquisitions, and downsizing all contribute to changes in equipment and network configurations.

Ideally, [network maintenance contracts] should be aligned with the technology or business objectives of the engagement. Misalignment can have a negative impact on deal pricing, quality of service delivery, and customer experience. - (Click to Tweet)

Pre-Negotiation Questions

1. What is your Request for Proposals process for maintenance contracts?

Since many network agreements are entered into as an afterthought, when new equipment is purchased, or are signed as renewals, RFPs for network maintenance contracts are not the norm. However, since most organizations have an RFP process that demands needs analyses, internal reviews, and budget negotiations, enacting your company’s formal RFP procedure may be an ideal way to ensure that you are not overspending on network maintenance.

An RFP for network maintenance should clearly list each piece of equipment on the network, usage levels, failure history, and coverage expectations. It should also include contract terms and conditions for non-compliance and coverage changes.

Most service providers have standard SLAs – that can be a good starting point for negotiation. These should be reviewed and modified by customer and legal counsel, however, since they are usually slanted in favor of the supplier. - (Click to Tweet)

2. What equipment is on my network?

Include serial numbers, models, and criticality assignments in your inventory. Investigate scenarios that may change the criticality assignment of the hardware. For example, a piece of equipment may be considered non-critical if all other aspects of the network are functioning as expected; however, in the event of an outage, the criticality of that hardware may increase.

It is also important to identify existing coverage provided through entitled support and any other maintenance contracts that may cover the equipment. Remember that OEMs may encourage companies to renew existing maintenance contracts without thoroughly reviewing the current state of the network, so it is up to the business to perform due diligence.

IT managers think they know their network inside and out, but in too many instances there have been so many upgrades and changes over the years that this isn’t the case. – (Click to Tweet)

Service Questions

3. What level of coverage do I need?

Instead of relying on the definitions assigned by your maintenance provider, evaluate coverage levels and descriptions based on your business needs. For example, a vendor may propose that non-critical equipment is assigned a guaranteed response time of two hours. However, without a precise definition of “response,” your organization may wait much longer to achieve service restoration.

For a vendor, “response” may simply be an acknowledgment of the issue or a clarifying question (such as “please confirm your contract ID”). Whereas, for a customer, “response” means that the resolution process is actively underway.

4. What factors influence response times?

Some contracts may include clauses that require the customer to respond to inquiries within a set period or incur response-time penalties. For example, if the contract-assigned response time is 30-minutes and the vendor sends a question within the set period but then the client does not respond for an hour, the vendor may not be required to adhere to the 30-minute response window.

Response times can also be influenced by “peak” and “off-peak” times and differences in time zones. To mitigate these constraints, avoid contracts that assign different coverage based on the time of day and ensure that all “time of day” limitations are made based on the client’s time zone. For example, if a failing piece of hardware is located in California, yet the vendor depot is in New York, cut-offs for same-day delivery of hardware may be reached before your California office goes to lunch.

5. Who controls escalation?

Tiered support allows vendors to resolve many issues without involving the highest levels of support. This keeps costs down and enables maintenance contracts to meet the budgetary needs of clients. However, some situations cannot be resolved by less experienced engineers.

end-the-it-nightmare

In these cases, navigating through unnecessary and time-consuming troubleshooting procedures simply to get to the next level of support is frustrating. To avoid this scenario, ensure that your network maintenance contract allows for client-driven escalation and de-escalation.

IT maintenance, with its cost, difficulty, and expenses, remains one of the most urgent and critical issues for organizations worldwide. - (Click to Tweet)

Management Questions

6. Does the contract include an indemnification clause?

If the contract was drafted by the vendor and not reviewed by your legal team, the answer is likely “no.” Indemnification clauses mandate that the service provider pays for any third-party litigation costs that result from a breach of contract.

This simple provision can save your company thousands and shows the provider that you are protecting your best interest.

7. How will disputes be resolved?

What happens if there is a dispute regarding the contract? Many contracts include provisions for binding or non-binding arbitration. Binding arbitration prevents the case from going to court while in non-binding arbitration, either side can decide to dismiss the arbitrator’s decision and take the case to court.

Often, adequate dispute resolution procedures are defined by an organization’s legal counsel. Entering into contracts that violate company-accepted procedures can have negative consequences. To ensure that your maintenance contract meets your company’s accepted procedures, have the contract reviewed and approved by legal.

8. How will contract updates be handled?

Many OEM maintenance contracts do not allow for equipment to be added during the course of the agreement without signing a new contract and issuing a new contract date. This forces the client to manage several maintenance contract start and dates and increases the risk of overlapping coverage.

To avoid this, ensure that your maintenance contract allows for the modification of equipment and coverage during the course of the agreement without signing a new contract. When hardware or coverage is added, expect that there may be additional charges. However, equipment removals or decreases in coverage should result in refunds or credits. Many OEM supplied contracts do not allow for refunds so be sure to review this section carefully.

Metrics Questions

9. How will metrics be tracked?

Metric tracking is the only way to ensure that a service provider adheres to the tenets of your network maintenance contract. Tracked metrics should reflect areas of maintenance that are under the control of the service provider and should motivate the correct behavior.

Endeavor to track metrics that are easily collected. In most cases, this means tracking actions that are automatically logged, such as equipment downtime and response times. Begin by setting a baseline of performance and measuring against that baseline.

Many network maintenance providers make metrics available via an online portal. However, when a contract represents a large budget line-item or covers a significant portion of the company’s assets, it is wise for the client to track some aspects separately and to show the provider which areas will be measured.

10. Which metrics will be tracked?

The specific metrics to track depend on individual contracts and the needs of the business. However, there are some common areas to look at when setting up metrics:

  • Service availability: this is the amount of time that the network is available for use (uptime). Service availability can be broken down further into time slots. For instance, your business may have a greater demand for uptime during the hours of 8:00 AM and 6:00 PM.
  • Defect rates: if the contract includes hardware replacement, tracking defects (or Dead on Arrival) in replacement equipment ensures that faulty replacement hardware does not exacerbate downtime.
  • Production failures: contracts that include backups, restores, and software updates should track the success of these actions. Missed backups can lead to increased downtime or cause rework for your internal teams.
  • Security: information breaches can be costly to both the reputation and bottom line of a business. To ensure that your network maintenance provider adheres to strict data management best practices, include security tracking in your metrics.

Do not enter into a network maintenance contract lightly. Consider all aspects of coverage, including equipment, service levels, changing business needs, and the costs associated with both non-coverage and over coverage. To ensure that your network maintenance is optimized for your business needs complete routine assessments of your network configuration, existing agreements, and entitled services. Be sure that your maintenance provider is held to the same high standards that you provide for your customers.

Download the Top 10 Considerations for Network Maintenance Optimization Tip Sheet! 

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