U.S. Hardware Support Pricing for Partners (Executive Summary) Executive Summary

Transcription

1 U.S. Hardware Support Pricing for Partners (Executive Summary) Executive Summary Publication Date: 8 January 2004

2 Author Ron Silliman This document has been published to the following Marketplace codes: ITSV-WW-EX-0403 For More Information... In North America and Latin America: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Worldwide via gartner.com: Entire contents 2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice

3 U.S. Hardware Support Pricing for Partners (Executive Summary) In the third quarter of 2003, Gartner Dataquest surveyed 19 U.S. external support providers about their pricing for selling their services to other companies that, in turn, sell these, usually in larger solution bundles, to end-user organizations. Although Gartner Dataquest has benchmarked hardware support pricing on many occasions, most recently in the report "U.S. Hardware Support Price Benchmarks for 2002," ITPS-WW-FR-0120, this is the first time that it has done so specifically for partner pricing. Because service partnering is becoming quite common in the industry, all parties must understand the economics of these relationships. Because of the extremely sensitive nature of pricing, respondent organizations were assured that no participants would be identified in this study. Organizations were asked to use the following choices to identify how they partner for the delivery of hardware support services: Using other companies to deliver services that the respondent sells on a private label basis, that is, in the name of the respondent organization Using other companies to deliver services that the respondent organization sells, but in the name of the subcontractor Delivering services that are sold by other companies to end users, in the name of those other companies Deliveringservicesthataresoldbyothercompaniestoendusers,butintheir own name Organizations were asked to identify what percentage of their hardware support revenue comes from services delivered by partners. They were also asked what percentage of their hardware support revenue comes from services they deliver on behalf of other organizations. Organizations were then asked about support practices that may reflect and impact their partnering behavior. They were also asked if they used independent subcontractors as part of a variable workforce model. Respondents who answered affirmatively were asked if they reported the wages of independent subcontractors on Internal Revenue Service W-2 forms or on 1099 forms. Also, they were questioned about whether they partnered for any portion of their help desk services, and those who answered affirmatively were asked if any portion of the outsourced help desks were located physically outside of the United States. Organizations were asked to identify hourly labor only for on-site support prices to partners for the following product sets: Desktop PCs with Pentium processors Desktop PCs with other processors Commercial laptop/notebook PCs Inkjet printers Laser printers Study participants were asked to identify their support pricing for these hardware products for four-hour response times with 24x7 coverage; for four-hour response times with 9x5 coverage; and for next-business-day 9x5 coverage. Respondents were asked if their organization required a minimum charge of two hours or more labor for on-site service. They were also asked if they charged a travel fee for on-site service and, if so, what that fee was Gartner, Inc. and/or its Affiliates. All Rights Reserved. 1

4 2 U.S. Hardware Support Pricing for Partners (Executive Summary) Because a great deal of support services are used in deployment engagements, organizations were asked to identify their partner pricing for the following elements of the deployment or installations, moves, adds and changes (IMAC) process: Basic PC install Data migration, per gigabyte Deskside software install Deskside headquarters upgrade Data wipe for disposal Disposal (with certification) Disconnect, move, reconnect peripheral to client PC Move PC within site Respondentswereaskedifthepricestheychargepartnerswerehigher,lower orthesameasthosetheyprovidetoend-userclients.whentheywerelower, organizations were asked to identify how much lower the prices were. Finally, organizations were asked to identify their margin goals for services they sell directly to end-user organizations and those they sell to partner organizations. Findings From the survey responses, Gartner Dataquest identifies the following key findings: In 2002, Gartner Dataquest estimates that more than $8 billion in hardware support services was delivered in the United States by companies other than those that originally sold these services to end-user organizations. Organizations responding to this survey provided about $2.9 billion in partner support in Only 36.8 percent of organizations used all four variations of the basic partnering model: delivering service in the name of the partner (sometimes called "private label" service); deliver service in its own name on behalf of a partner; selling services that are delivered by other external service providers (ESPs) in the name of the respondent organization; and selling services delivered by other ESPs in their own name. The most common relationship with partnering among respondents was the delivery of private-label services on behalf of another organization (done by 84.2 percent of respondents). On average, organizations report that 12.2 percent of their hardware support revenue came from the services delivered on their behalf by other partners, but 34.6 percent of hardware support revenue came from services delivered on behalf of other partners. This reflects a statistical anomaly that occurs when organizations of different sizes are asked the same question. In this instance, smaller organizations tend to support larger ones. The same amount of revenue thus reflects a smaller percentage of the hardware support business for the company that is subcontracting delivery and a larger percentage of the revenue for the company providing delivery. More than 70 percent of respondents use some form of independent subcontractors to augment their own technical field force. However, less than 40 percent of respondents use partners to provide some or all of their help desk services. When they do use help desk partners, two-thirds of respondents have obtained the services of call centers located outside of the United States Gartner, Inc. and/or its Affiliates. All Rights Reserved. 8 January 2004

5 U.S. Hardware Support Pricing for Partners (Executive Summary) 3 Recommendations When charging partners on an hourly basis for the on-site support of hardware products, the product itself as well as its complexity and market value have almost no impact on price. Coverage model determines price: the number of hours covered per week and the response time required. The nature of the product impacts pricing when charged on a per-incident basis. Two-thirds of respondents surveyed require a two-hour minimum on calls when priced hourly. Half of the respondents require a travel fee in addition to the cost of the event. Three-quarters of the organizations that require a travel fee also require a two-hour minimum. Average partner pricing for specific billable tasks associated with the IMAC process ranges from a low of $46.20 for a data wipe to $73.50 for a basic PC install. Much more surprising was the range of average prices in the marketplace for the same IMAC tasks, where the high price charged by one providermightbeasmuchas16timesthepricechargedbyanother. Partner pricing for dedicated on-site technicians ranges from a low average figure of $88,100 for a basic PC technician to a high of $141,000 for an advanced network administrator. However, the range of prices available in the marketplace was far narrower, with higher prices being closer to three timesthepriceofthelow. Only 60 percent of organizations that provide services to others in the hardware support marketplace charge partners a wholesale rate, a lower fee for the same service than would be charged to an end-user customer. When lower prices are used, they tend to average just under 20 percent lower than "retail" for the same point services. Major original equipment manufacturers (OEMs), systems integrators and other organizations that stand to benefit significantly from the cost advantages of delivery partners in lieu of "home grown" labor forces will continue to be reluctant to partner if the partnering market appears chaotic and unpredictable. Gartner Dataquest makes the following recommendations based on the survey findings: Because the U.S. hardware support partnering marketplace shows signs of being quite immature as a market segment, it offers serious opportunity for companies that can fully understand its dynamics, rationalize its practices and exploit its potentialities. Very few companies have attempted to do so and instead merely set up a second business, as if partnering were merely an echo of selling and providing support services directly to end-user organizations. Others handle it on an even more informal and ad hoc basis. Neither approach will be successful in the long run. Organizations that seek to subcontract support delivery to partners on a strategic basis, such as an OEM that chooses not to have a field service division of its own, should focus their search for partners by focusing most on the potential partner's long-term commitment to the alliance marketplace. There will be winners in alliance support delivery, and OEMs, systems integrators and other prospective customers for such support will benefit from putting the best business model and partners into place early Gartner, Inc. and/or its Affiliates. All Rights Reserved. 8 January 2004

6 4 U.S. Hardware Support Pricing for Partners (Executive Summary) Organizations that seek to subcontract support service delivery partners on a more tactical basis still must keep in mind many considerations when determining which partner to select for any given engagement: skill set, geographic coverage and price are each important. Nonetheless, when the range of pricing for specific deployment tasks can be as great as 13 to 1, it behooves everyone to take due diligence seriously. The use of additional fees, such as minimum hours per incident or for travel, can add dramatically to the cost of a call. Organizations that plan to grow their partner or alliance business while still competing for direct end-user business must fully understand the cost elements of these two different paths to market. If a more mature market insists on a "wholesale" price 20 percent below the "retail" price to the end-user account, and the service provider plans to deliver the same quality of services to its direct and indirect clients, support delivery organizations must understand how to keep both sides of the business profitable. For the full report, see "U.S. Hardware Support Pricing for Partners," ITPS-WW-FR Gartner, Inc. and/or its Affiliates. All Rights Reserved. 8 January 2004