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June 28, 1999

Services: Needs Grow

Smaller businesses want improved options for support, maintenance

By Aaron Ricadela

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Emerging Enterprise Resource Center

xecutives at emerging enterprises are beginning to demand that hardware companies offer them more comprehensive, flexible support and maintenance services--just as they do for their larger customers. Vendors are responding: IBM and Hewlett-Packard are revamping the extended manufacturer warranty service packs they traditionally offer small businesses to provide them the range of choices usually afforded enterprise customers. And Dell Computer will target these companies with remote diagnostic services due this summer.

In the coming months, IBM Global Services will expand a pilot it quietly launched in March that uses a few select channel partners, including MicroAge Inc., to sell companies with 50 to 500 employees the type of umbrella contracts IBM has sold directly to large enterprises for years. IBM has put about $1 million into the program, which lets small businesses configure through resellers a single maintenance and support contract for all their hardware from IBM and other suppliers, for about $5,000 to $50,000 per year. The goal is to eventually offer the services nationwide.

Most IBM small-business customers now pay $100 to a few hundred dollars per year for an extended manufacturer warranty, covering installation and on-site service, for each IBM PC they purchase, or up to several thousand dollars a year per server.

Garrett Grainger, VP of information systems at Dixon Ticonderoga Co., a $130 million pencil manufacturer in Heathrow, Fla., says it's ahassle to manage multiple service contracts with different expiration dates for the PCs and servers it leases from IBM and Gateway. The IBM bundle �would be perfect because I could get blanket coverage,� he says.

�Our traditional channel model of service packs is not satisfactory for growing an IT system,� says Yves Lozach, director of channel strategy for IBM Global Services' product support division. On top of manufacturer-provided installation and on-site service, the new model uses channel partners to offer preventative maintenance through real-time performance monitoring, problem diagnosis, and software patches via the Web.

Establish Credibility
In an era of commodity hardware, it's critical for IBM and other vendors to establish themselves as service providers to fast-growing companies. Research firm Access Media International says small and midsize businesses spent $13.6 billion on PC-related services last year. IBM says the market for all computer services to such companies is outpacing the IT market as a whole.

HP's Business PC Organization is enhancing a service program, introduced for its NetServer line this spring, that makes it easier for small companies to get different elements of an extended warranty through HP and resellers, says services and support manager Duncan Campbell. When customers have to choose between the two, he says, they often wind up with too much or too little support. Starting this summer, the program will cover desktops, notebooks, and storage, allowing emerging enterprises to get, say, a year of on-site repair coverage from HP, and step-up options such as four-hour response time from the reseller. Campbell says costs range from about $200 for a desktop to $2,000 for a server yearly.

The program sounds good to Matthew Schoen, VP of IS at Allsport, a subsidiary of the $185 million photo stock house Getty Images. Schoen has a mix of Dell, HP, and Micron systems, and says he doesn't mind using systems vendors' reps when problems aren't urgent, but local resellers may be better when uptime is critical. If a local reseller's rep arrives with the wrong part, for example, it will likely take the rep less time to come back with the right one, he says.

Rob Enderle, a VP at Giga Information Group, says HP is the first systems vendor to make divvying up a hardware service contract among sources an explicit sales option. �By being more flexible, they could best match the price and needs of the account,� he says.

But serving emerging enterprises often requires in-depth support options, say resellers. �Just because they're small doesn't mean their requirements aren't complex,� says MicroAge VP of services Frank Picarello. MicroAge provides product and support bundles that go beyond extended warranties to �solve business problems,� he says, such as packages of Microsoft apps, Cisco networking gear, and HP desktops for a fixed monthly price per seat. MicroAge reps are trained to support these common combinations to increase system availability, which makes small companies more attractive partners for larger companies, Picarello says.

At the PC Expo trade show in New York last week, Dell chairman and CEO Michael Dell said his company is also embarking on an aggressive computer services campaign. Dell will unveil in the next few weeks a partnership with computer diagnosis startup Motive Communications Inc. to provide emergency service support to small businesses. Motive's Duet software takes a snapshot of a PC or server at the point of failure; it then leads users to targeted repair sites on the Web, or escalates the call to a manufacturer's phone rep. Dell is expected to introduce the software on small-business systems at no extra charge. �This prepares us for Internet support,� says Dell services director Robert Riazzi.

Compaq is also developing diagnostic software that integrates with its Web site and phone support, which it may offer to small businesses, say industry sources. Two weeks ago, Micron Electronics Inc. launched a program for emerging enterprises that puts application repair and backup software on new systems.

Emerging enterprises will reap benefits as competition in the hardware market grows more fierce, predicts Neal Johnson, a technology analyst at investment bank Robinson Humphrey. �As vendors look for new avenues for growth,� he says, �servicing emerging enterprises is coming up on their screens.�