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At Your Service

Can’t Decide Whether to Love or Hate Service Agreements? You’re Not Alone 

By Christopher Neto

It has many names—a service maintenance agreement, a fixed-price support contract, a service level agreement, a maintenance contract, a service contract, or even an extended warranty (although this term can be limiting). The basics are that service agreements were originally developed as the insurance policy for products and services. For the customer it gave them piece of mind that if something were to go wrong your service agreement would cover it long past your warranty.

Service agreements, in theory, are simple. The words alone describe it as a contract between two people—one, the seller, the other the buyer. The seller will offer a service agreement to the end-user as a worry free solution in the event that something goes wrong. That’s is the simplest way to describe a service agreement but if I told you it took me over an hour to simply a definition for service agreements would you believe me? When I sat down to write this article I figured service agreements are easy—someone sells it and a user buys it. Chances they don’t use it and so goes the vicious circle. It is a complicated issue, however. I can’t figure out whether to love them or hate them.

Outside of my work at AV Helpdesk as a consumer, I’m a fan of service agreements. I love them as much as the electronics they protect. What I have learned over the years is that manufacturers’ warranties on the consumer side are standard 90-day fare. Big Box Stores will not let you return a product after 30 days. So what I am to do? I shop around, compare prices, and always purchase a service agreement. The cost and terms of a service agreement will vary tremendously from store to store. There are times where I feel as if a service agreement in unnecessary but I quickly think back to one instance in which a service agreement saved me a spending a few hundred dollars.

The Anatomy of an Agreement

Most service agreements with which I have worked are from AV vendors. They can be the original installer of the equipment but chances are that the service agreements and contracts were sent out to bid and not won by the original installer. As a tech manager, I had to carefully navigate through new install warranties, their expiration, and the contracted service agreements that go into place once the warranties expire.

Service agreements go into effect once the installed is approved by the customer. A typical agreement would include a response plan, diagnosis, repair, install, and test. For example, in a typical “48 hours response service agreement,” the AV service vendor will be onsite within 48 hours with parts. The vendor will pull the equipment if necessary and send it out for repair. My service agreement will pay for the service technician to come out to the site, test, and pull the equipment for repair. That is the 48-hour part of the service agreement. Since end-users deal with complex integrated systems with various technologies, we are held to the varying repair policies by the respective manufacturers. Most likely, I will get a bill for a bench tech to open and diagnose the equipment offsite even though the technician already deemed the unit as failing. I can also expect to pay an upcharge to get the part back sooner. So the 48-hour service is now taking over a week along with added cost. Not the same experience you get from the Big Box Store. So what went wrong?

In most large companies, service agreements are treated as a capital expense. Service will fall into another area of the budget. Many companies will only take the original warranty and no service agreements with the initial purchase. The procurement team will then get involved and create a service agreement bid for the newly installed equipment. Unfortunately, not every AV department will meet with procurement with regards to what should or shouldn’t be covered. This is where service agreements get a bad reputation. Since the technology that makes up an integrated system will come from various manufactures so will the warranty terms. As a result, the procurement department will choose a particular type of room and cover all the parts in that room. What that means is a very high-cost solution to cover every piece of hardware in one type of conference room.

An Effective Approach: Categorization

The most effective service agreement I have worked with divided rooms into categories and subcategories. Once we narrowed the rooms down into categories, we started to treat each category as a separate service agreement. The first level of categories was Presentation Only, Integrated Presentation, VTC Only, Integrated VTC Rooms, VIP Rooms, and Unique Spaces.

The first five types are self-explanatory. The unique spaces category was the hard to define rooms or the “one offs” such as cafeterias, auditoriums, and large conference rooms. You will notice that telepresence rooms, digital signage, and broadcast facilities are not part of my categories. Telepresence systems have their own service agreements in place and are not typically included in the general public rooms. Digital signage is usually a debate over who will cover maintenance, while broadcast/webcast covers their own equipment. AV will cover the equipment in the public spaces such as auditoriums and their booths. Though even that has been a source of concern since broadcast love manual mixers and patch panels while AV departments push for automation for the end-users behave. As you add categories and place your rooms into the categories you will now see that 24 hours response should only be reserved for VIP rooms or auditoriums where high level executives, down time, and event relocations will be difficult if altered. The service level can be a 48-72 hour package where you can accept the risk of a room shut down for three to five days. This is where procurement should be negotiating. You lay down the acceptable risk and they write the bid your needs for the bidders to see. You can drill down even further into longer acceptable down times as a way to save. In many instances a simple time and material contract will work fine.

Key to Service Agreement: On-Site AV Support

As a technology manger, service agreements may help you sleep at night or become the reason you wake up screaming in the middle of the night. Depending on how your support organization is organized, service agreements may be necessary in some instances and a waste of money in others. If you are lucky enough to have an onsite, hands on support team of AV technicians that have the ability to follow through with projects, then you can comfortably ask for different levels of service within the service agreement. On a site where the AV technicians can swap projector bulbs, extract, and install programming codes and perform equipment swaps the need for a service contract with onsite support may become less a need. A simple overnight parts agreement may suffice in many instances. The company with the skilled AV support team can choose to buy spare equipment as a way to mitigate risk. Having parts and spare equipment in stock and the ability to install it is the best defense against long down time. Your tech teams become paramount in a service model that uses spare equipment. Not only are they installing but you are relying on them to diagnose a problem and effectively communicate that back to the integrator/AV service provider. I cannot stress enough the need for qualified onsite technical AV staff that can remove, replace, and re-certify the system for use.

Remote Offices Without AV Support Onsite

You will have limited choices in remote offices without AV support onsite. A typical service agreement for a small remote office would be onsite response. The best-case scenario for a problem at a remote site is a quick and simple fix that can be diagnosed and handled on the phone. In a worst-case scenario, the service company cannot diagnosis the problem and the repair drags on past the service level agreement. Remote offices unfortunately are regulated to high cost onsite service agreements unless they are willing to accept a longer down time or are willing to designate an onsite person to assist with the diagnoses of a problem. This could save the company on upfront costs but there is no guarantee that “Ted” from the Accounting Department will diagnose the problem correctly while on the phone with Support.

Regardless if you do or don’t have control over who is selected to provide the service agreement, please make it a point to meet a vendor’s rep immediately. Begin communicating immediately if there is an issue. The contract will not be worth the paper it’s written on if the service provider does not have plan in place to meet your needs. For example, outsourced call centers are a great business tool to receive calls 24×7 and generate tickets, but they may not be able to tell you the difference between BNC and CNBC. Please look into the details of how calls are received, handled, and communicated. How are problems escalated? How will tickets be communicated to you the customer and to your onsite AV Support staff? And, ultimately, if the service level agreement is not met, how would we go about terminating the contract? Manufactures will also need to step up. The worst case scenario for the customer or AV vendor is a manufacture that will not stand behind their product.

I tend to like service agreements when combined with a qualified onsite AV staff. I dislike the all-encompassing agreement that cover everything and usually littered exceptions, holes and additional costs. Take the strategic approach of dividing and conquering your rooms. Since technology changes so quickly, the logical approach would be to refresh the technology every four to five years. The ever-changing technology and fine print details of service agreements will make you wish that all you had to worry about was a simple washer and dryer.

 

Original Post can be viewed on AVtechnologyonline.com

Comments

  1. the service contract is an essential piece of the puzzle.  and we are continuing to move to a world where there is almost no money in the initial sale.  Just like the IT world, products are becoming more and more commoditized, so the only places where there will be money to be made are (in some cases) 1. Pre design/consulting 2. Professional services on installation/implementation and 3. service contracts.

    in the IT world, it is ASSUMED there will be a service contract, and it is assumed that there will be options to lock in for an even longer period of time (3-5 years)

    When i worked for Verisign, it was perceived as odd if there was no extended service contract offered.  

    the other benefit of the service contract is the ability to regularly visit the client (proactive service checkups) and make recommendations on other facility upgrades and installs.  and being the vendor or record who already has terms and a presence is a HUGE benefit.  in some cases, being the vendor of record meant that i did not need to send a project to bid.

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