Service Contracts & Extended Warrantees, Part One

SERVICE CONTRACTS & EXTENDED WARRANTEES - Part One

by Wayne M. Krakau - Chicago Computer Guide, November 1997

A service contract for hardware, software, or both, is a valuable option, but one with more limits and potential real-world pitfalls than most would surmise. For many years, I have sold service contracts, referred my clients to third-party providers of service contracts, and, most frequently, worked on my clients’ behalf in obtaining contracted services from vendors. I have found that they must be evaluated as carefully as any other type of insurance product, since the life and health of your computer system are at stake.

Hardware-only service contracts are the most common. They come in two major flavors. The first is the base contract offered by the manufacturer of the hardware while the second is offered by either dealers or third party firms. There is usually a certain amount of service bundled directly with the hardware, and often, an optional "enhanced" or "extended" warranty. These can include various combinations of on-site and depot (carry-in) service.

An example is one manufacturer that bundles first-year on-site and second-year depot service with its premium line of computers. (The low-end line gets a two-year depot warranty.) For a little extra, you can upgrade to a two-year on-site agreement. For more money, you can upgrade to a maximum of a three-year on-site agreement. The dealer has the option of bundling one of the optional contracts with the computer. The extended warranty options are so inexpensive, that, depending on the needs of my clients, I often bundle the three-year on-site warranty with the computers. At other times, I simply offer the extended warrantees as a separately listed option.

The major limit of this offer is that only parts supplied by the original manufacturer are covered. If I add options to the computer, for instance, they aren’t covered. Since the reign of the single-brand LAN ended (at least according to the national press) somewhere around 1987, you have to either trust the individual manufacturers of any added components, or you have to purchase an all-encompassing third party service contract. Note that any third party contract should take into account any overlapping manufacturers’ warranties when calculating fees.

Other manufacturers offer more extensive warranties, including some with maximum response times. Examples could be twenty-four-hour, eight-hour, or even four-hour maximum response times. Obviously, the shorter the guaranteed response time, the more you pay. Also, very few manufacturers will cover more than just their own products.

Third party providers are much more flexible on brand coverage, but they still have their limits. I have found them very reluctant to provide anything more than extremely restricted coverage on RAID (Redundant Array of Independent Disks) systems and high-capacity tape drives. Since most of the servers that I sell have both, and they are mechanical devices (as opposed to purely electronic items like circuit boards), the kind most likely to fail, the value of the service contract is limited.

Another limitation of time-sensitive service contracts is the difference in interpretation of the average individual versus that of the contract provider. For a four-hour on-site contract on a computer, most people think that a computer expert with a wide array of diagnostic hardware and software and enough spare parts to rebuild the computer from scratch will arrive on site four hours after the call for help is begun. WRONG!!!!! Something like this might happen. You notice a problem and call for help. After waiting on hold anywhere from a couple of minutes to over thirty, you talk to a gatekeeper (a term I’ve appropriated from multiple articles that I’ve read on abuses by Health Maintenance Organizations.). This person is essentially a nontechnical or semi-technical call-screener whose job it is to confirm that you have a valid contract, that the general description of the problem fits those specified in the contract, that an authorized person (as defined by the contract - a common restriction) is making the call, and that the person calling can recite all of the appropriate contract and/or code numbers.

At this point, you may be asked who played Tom Cruise’s second back-seater in Top Gun. (Answer: Tim Robbins of Shawshank Redemption fame.) You may also have to come up with the names of the Seven Dwarfs (I’ll let you figure out this one.) - anything to prevent you from getting through to actual technicians. That’s the gatekeeper’s real job. The gatekeeper may also try to convince you that the specific problem is not covered under the contract because of mishandling on your part, incorrectly configured or buggy software, or the malfunction or incompatibility of non-covered hardware. A simplistic answer to your problems might also be offered. If you tell the gatekeeper your computer is smoking, then you might be instructed to get your computer to either use a patch or, at minimum, to switch to a filtered, low tar brand.

Once you’ve made it past the gatekeeper (after having twisted your phone cord into knots in frustration), you are given an incident number and placed in a queue waiting for a technician. (Heaven forbid you should forget the incident number! Then you might have to start the whole process over, or at least wait fifteen minutes while someone tries to cross-reference your company name in a poorly designed database.) Once you’ve waited an additional two to thirty minutes (or more), you get to talk to the technician.

The technician will usually have an encapsulated description of your problem as interpreted by the gatekeeper. It may or may not be accurate - flip a coin. The technician will then use his or her greater skill and experience to come up with new and interesting ways to disqualify your service request on technical grounds - ones that the gatekeeper (and possibly you) could never imagine.

You will be asked difficult technical questions about your system’s configuration. You will also be asked for intimate details about your computer, such as the "rev" (revision number) of your motherboard. If you are not a computer techie yourself, and have no computer specialist on staff, you might not be able to answer these questions, so you will be ridiculed for your lack of technical expertise, and possibly disqualified from receiving service for not supplying enough details to the technician. At that point you may mention to the technician that you purchased the contract specifically because of your own company’s lack of in-house technical staff. This response will usually be an accusation of having an uncooperative attitude.

If you are technically skilled in computers, you will be asked to do much of the diagnosis yourself. You will be expected to open the computer to find the motherboard "rev" and other details. You will be asked to experiment with swapping out various boards or changing switch and jumper settings - after hanging up, of course. If you tell the technician that you don’t have spare parts and cannot, as a practical matter, shut down one of your working computers to get spare parts for board-swapping experiments, you will be seen as uncooperative. If you explain that you have the skills, don’t have the time to experiment, and specifically purchased the contract to avoid spending time fixing computers, you are again labeled uncooperative.

Once the technician has chosen the diagnosis, he or she will try to just send the replacement parts to you and expect you to install them. After you’ve wasted more time convincing the technician to honor the full service agreement by sending a person to do this installation, the technician will actually start the process of dispatching a person with the appropriate (you hope) parts and tools to your company.

Next month I will continue presenting this admittedly worst case scenario and go on to cover software service contracts. Once I have covered the potential pitfalls of service contracts, you will know what to avoid.

Š1997, Wayne M. Krakau