Paying a VAR for Managed Services? Be Careful.

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Line item quotes, while tedious, are absolutely critical for ensuring a fair deal for enterprise IT and telecom offerings. NPI advises clients to ask vendors for line item quotes that include OEM part numbers, descriptions, quantities, list and net pricing.

This has become increasingly important as more hardware, software and cloud vendors bundle their offerings – which gives them room to hide incremental and often unnecessary services and costs.

One particular area where bundling is leading to customer overspend is Level 1 and 2 support for managed services with VARs. In these instances, the VAR is certified in a particular vendor’s technology and resells its support services. Under this agreement, the VAR takes 1st and 2nd level trouble tickets acting as an intermediary between the customer and the vendor rather than the customer calling, emailing or chatting with the vendor directly.

More and more often, NPI is finding that VARs and vendors are hiding extra charges under these support service packages, such as fees for security technical project managers and implementation owners, and “change management” services. Because pricing is delivered as a single line item in a monthly or annual cost format, most customers have no idea they’re agreeing to these extra charges.

We see this occur often when dealing with telecom providers. Fierce competition and shrinking margins in the network delivery market have driven many providers and VARs to bundle amped-up services that most customers don’t need (or see little benefit from). In one instance, one of NPI’s clients had been subscribing to a URL filtering solution that was “delivered through” a telecom provider. The reality was the telecom provider was simply reselling the services of the URL filtering provider and charging an incremental 20 percent on top of the subscription for acting as a go-between.

Our advice customers is this: No matter what services you are subscribing to, whether direct from the OEM or prepackaged from a VAR, insist on line item pricing. It will pay huge dividends in the long run and continue to ensure that the organization knows how each and every IT dollar is being spent.