Are Service Contracts Good Business?

Are Service Contracts Good Business?

Are Service Contracts Good Business?

If you're considering purchasing a service contract for your company, your decision is going to depend on some additional variables to decide whether or not it's worth the cost. Do you have an in-house IT staff? Is that staff large enough to handle repairs for all of the hardware at your site?

Can you afford to stock an inventory of spare parts or establish a relationship with a vendor who will sell them to you wholesale as you need them? How reliant is your business on the individual computers and peripherals that you have purchased? How long can you afford for an employee to be without a computer while you wait for parts to come in?

Size matters

The larger your company, the greater the chance that you can build the resources in-house to meet your computer repair needs. But as your company grows, the number of computers you must service will also grow, and you will need the staff and the parts supply chain to meet those growing demands. The good news is that the more computers you have to service, the lower the price of an annual contract per laptop or desktop computer is likely to be.

If you have less than ten computers in your network and one or two general purpose technical people on your staff, the cost of an annual service contract would probably be prohibitive. You won't get much of a break for volume, and chances are you could stock a couple of backup computers and a supply of parts for less than the price of the contract for one year.

Larger companies, though, have a real balancing act to do between the cost of in-house staff and supplies sufficient to meet potential demand versus the cost of outsourcing hardware support. Many businesses are finding it cheaper to pay for service contracts and using the more expensive in-house talent for software support and development.

Consider a tiered strategy

Small to medium-sized businesses may find it most suitable to take a tiered approach to service contracts. Perhaps you will want to cover mission critical items, such as network servers, with in-house staff or a more expensive on-site, guaranteed fast response service contract. Individual workstations might be covered by an off-site contract or one with lower response time. And you might elect not to cover most peripherals on contract at all, choosing to pay per incident for these devices.

A tiered strategy allows you to invest your support dollars in the parts of your business system where an outage is likely to cost you the most. Consider also adding monthly or quarterly maintenance service to outside support contracts. Good maintenance can prevent most common problems and can save you a bundle in repair costs down the road.

Conclusion

How you use your equipment and how long you can afford to be without it are the key factors to weigh against the cost of any extended warranty or service agreement. Many businesses find annual service contracts worth their weight in gold. But many home users, especially those who like to tinker on systems themselves, would be better served using extended warranty money to buy only the parts or services they need.

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