Jul 18 2017

What’s Your Smartest Choice in an IT Service Provider? (Part 3)

pexels-photo-297648In part three of this series, we continue to explore the pros and cons of managed (service contract) information technology (IT) services and time-and-materials (break-fix) IT services. We are seeking the smartest choice for small businesses. So far we have seen difficulties with each IT service provider model. Problems include paying for services when no services are provided (service contract); a lack of on-site presence (both models); and an incomplete knowledge of your computer system needs, issues, and challenges (both models). While problems arise in both models, I have found that the majority of issues still fall within the service-contract option. Here are several more problems with this model:

First, service contracts do not fully cap your support costs. If equipment is lost or damaged due to fire, theft, lightning, flood, or any other disaster, the contract will not cover replacement equipment or the labor to set up new equipment. Also, if you want to add new equipment to your existing contract, managed IT service providers will most likely require you to buy the equipment from them (at a markup) or else you will need to pay for additional labor to set it up. Additional costs arise for hardware or software upgrades beyond the scope of the contract.

Second, managed IT (service contract) vendors like to promote SLAs (service level agreements). They guarantee a human will answer the phone. They guarantee someone will be there within 4 hours. They guarantee you won’t be charged for the time you were down. What if they don’t meet one of those guarantees? All they can do is offer a credit for part of your monthly fee. For example, if your server crashes and it takes the managed IT provider 3 days to restore your systems, the provider will most likely offer a credit for 3 days out of the 30 days in that month. You might get a couple hundred dollars back for thousands of dollars of lost business. This costs the managed IT provider virtually nothing. It costs you greatly. The bottom line: The SLA means nothing. Whether you pay for time and materials or a monthly service contract, you will not be satisfied if the provider can’t produce results.

Third, service contracts are priced to make money for managed IT providers. If the provider guesses wrong and loses money on a contract one year, you can bet contract fees will increase for the following year. The rationale sometimes provided is that competitors that charge time and materials have no incentive to fix your problems—that they want to prolong your problems so they can charge more and more. While this could be true in some cases, the core point is that it is simply an issue of customer satisfaction. If a provider can’t keep the client satisfied, the client will leave. It is easier to leave a provider that charges for time and materials than one that charges for a long-term contract. An argument could be made that the time-and-materials IT provider has a greater incentive to keep the client satisfied.

But what if there was an alternative to the strict break-fix or service-contract providers? There is. Relationship-based service focuses on what is best for your needs. A personal knowledge of you, as the client, and your company’s needs and goals, sets the foundation. Read about this in more detail in the fourth (and final) part of this series.