Demand for Third-Party Support on the Rise as IT Budgets Tighten

By Rich Staas

Director of Client Services, NPI

August 03, 2020
IT Rich Staas

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With the pandemic putting new financial and operational strain on organizations, NPI has seen an uptick in the demand for third-party support for hardware and software. While there are a few drawbacks to third-party support, cost savings of 50 percent or even more make it attractive during economic volatility.

The number of credible options has expanded as the third-party support market has matured. Today, these support providers cover a long list of enterprise software and hardware vendors – including Oracle, IBM, Cisco and even Microsoft. Also numerous are the benefits of working with a third-party versus direct OEM support. They include:

  • Lower operating costs
  • Potential for a better SLA
  • Workingwith a single provider that supports multiple vendors
  • Potentially longer life of hardware

One other positive byproduct of bringing a third-party support option to the table is OEMs that may have previously been inflexible sometimes make concessions in order not to lose the business. The key here is that it must be a credible option. OEMs are used to hearing customers talk about third-party support as a competitive threat. Unless they see it as a serious threat, they will maintain their stance on support costs.

Back to the drawbacks – they do exist depending on your company’s unique support requirements. These typically include:

  • Upgrades will no longer be available to you, so you may be “stuck” with your current release
  • Security enhancements will not be available
  • Resuming direct-from-vendor (OEM) support can be costly if you want to return to this option in the future – back maintenance, penalties and higher fees are typical

How to Know if Third-Party Support Makes Sense for You

Like all IT decisions, the decision to use third-party support is specific to your business. Some companies have no option but to maintain OEM support on certain facets of their IT estate. On the other hand, if upgrades are not important and/or you have custom enhancements to a system that is a few releases behind, third-party support may be a great option. Likewise, if you need to make near-term material IT cost reductions, and you know you can go for a sufficient period of time without upgrades and security enhancements, the savings may warrant the switch even with high reinstatement costs.

In recent months, NPI has seen third-party support offers on major software vendors (Microsoft, Oracle, etc.) be 30 to 70 percent lower than OEM quotes. We’ve also seen certain OEMs come back to the table with 30+ percent cost reductions when a credible third-party support alternative was brought into the mix – which is a firm reminder of the power of strong competitive leverage.