You'll almost always get a better price for maintenance and support if you negotiate service contracts separately...
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from the price of new arrays.
Storage support contracts are optional and their prices are negotiable. But most storage vendors, especially major vendors, insist otherwise and will usually roll the price of support into the price of the new equipment. Organizations that negotiate storage support contracts separately from the purchase price can lower their acquisition costs, get better service terms or both.
The price of storage support is a touchy subject. Third-party support companies that compete with vendors for storage service contracts are reluctant to discuss discounting for fear of losing their vendor certification. And many users remain mum on the topic amid concerns that a vendor might not be as responsive when they have an urgent service need.
"We have 21 storage arrays. If we paid 15% to 30% per year for service and maintenance on each array, it wouldn't be long before the cost of service and maintenance outstripped the cost of the array," says Jeff Stein, senior engineer at InteleNet Communications Inc., a managed hosting provider in Irvine, CA. Stein's company has never bought a storage support contract.
|Is stocking spare parts a wise investment?|
|One way to speed your response to an emergency is to keep spare components onsite; if a component fails, simply pop in the spare part. Irvine, CA-based InteleNet Communications Inc. purchased a spare controller, power supply and disks when it acquired its first iSCSI array. However, storage failures have been so rare that InteleNet is sitting on an unused spare controller that won't work with its latest iSCSI SAN. Hello, eBay.|
Modern storage equipment, with the possible exception of moving parts such as disk drives, is remarkably reliable. "In our two years of experience [with EqualLogic Inc. iSCSI arrays], failures are very rare," says Stein. And when something does fail, it's very easy to replace components, so InteleNet stocks its own spare parts (see "Is stocking spare parts a wise investment?," at right). "We know how to read documentation," says Stein. "We've saved a lot of money by not buying service."
According to the CEO of a small storage vendor, support is a profit center for big vendors who routinely manipulate support prices to boost product sales. "Small vendors, especially in recent years, have been offering three-year warranties with free support because they are desperate to win business," he says.
With the high reliability of today's storage, support contracts are increasingly lucrative. "Just do the math," says Mike Karp, senior analyst, Enterprise Management Associates, Boulder, CO. "If the vendor is getting an extra 18% or 20% each year, it adds up. And that percentage is based on the list price, not on a lower purchase price that might have been negotiated."
There are several options for organizations that want to reduce or eliminate storage service costs. A few, like InteleNet, are confident enough in their in-house technical skills and the general reliability of the equipment to go it alone. Many are buying arrays with extended free-service warranties. Others are turning to hardball negotiations to chip away at the cost of service contracts. Playing vendors against support costs from third-party companies usually results in lower support costs.
Vendors typically offer multiple levels of technical help, ranging from basic telephone support that may include firmware upgrades, to comprehensive 24/7 onsite support with a two-hour response time. The price for such support ranges from free during the warranty period to 30% or more of the list price of the storage gear. Most support programs cost 15% to 20% of the list price of the storage gear, with 18% being a commonly cited figure.
Once the warranty period ends, most storage vendors would rather sell a new array than mess around with service commitments on older equipment that's increasingly likely to fail. And many storage managers would rather buy a new array soon after the warranty ends on an old device.
Whatever a company pays for support, the actual service will most likely be delivered through third parties certified by the vendor. These include VARs, storage integrators like Datalink Corp., consulting firms like GlassHouse Technologies Inc., and large global service organizations like Anacomp Inc. and Eastman Kodak Co. Although some large storage vendors such as EMC Corp., Hewlett-Packard Co. and IBM Corp. maintain their own support staffs (at least in major markets), much of the actual onsite vendor service is delivered by third parties.
"Don't expect any of these third-party firms to necessarily be familiar with your storage unless you have a very popular array," warns a storage vendor CEO, who uses third parties to deliver his company's service. The third-party firms provide service for multiple vendors, each with multiple storage models. However, the likelihood that the service representative showing up at your site somewhere in the hinterlands will be familiar with your particular storage array is small, says the CEO.
Vendors try to hide the price of support in a number of ways. They might break it into separate components, such as fixing broken hardware and firmware upgrade support or, conversely, fold it into the acquisition cost. However, folding the price in only obscures service and acquisition costs. Breaking apart hardware and firmware support won't save you anything unless the vendor is willing to let you buy one without the other.
The warranty that comes with the array can also be used to obscure the cost of service. Some vendors include free support during the warranty period, but charge extra for higher service levels, such as 24/7 response or onsite visits.
"We took the Nexsan [Technologies Inc.] arrays in part because their three-year warranty includes free hardware and firmware support," says Eugean Hacopians, senior systems engineer at the Infrared Processing and Analysis Center (IPAC), a NASA project based at Caltech in Pasadena, CA. The organization maintains half a petabyte of storage divided among several groups; Hacopians' group relies primarily on Nexsan arrays under warranty. "Because of the free warranty support, we don't purchase maintenance programs," he says.
That isn't the case, however, with the 40TB-plus of storage other groups within the organization still have on EMC and Sun Microsystems Inc. arrays. "We tried to warn the groups that bought the EMC that the support would break their back," says Hacopians. In their case, the EMC support costs approximately $100,000 a year on a four-year support contract.
|Pull the right negotiation levers|
Another IPAC group had six Sun Fibre Channel (FC) arrays, each with 1.1TB of storage. "The Sun support was getting really expensive, so we switched to a third party," says Hacopians. But third-party support doesn't significantly lower the cost. "We were able to lower the cost only by reducing the number of machines we put under support," he says. The group decided to not support certain arrays used for noncritical storage.
Sun wanted the group back and offered a new deal; it would support each FC array for $1,000 per year per array. "We're really a Sun Solaris shop to a large extent," reports Hacopians. In the end, the Sun storage support was mixed in with IPAC's Sun server support, which further obscures the actual storage support cost.
There's no shortage to the excuses vendors will offer for not negotiating service rates. For example, one vendor claims financial reporting requirements prevent it from discounting service contracts because it has to report the full contract value for each reporting period.
"Most people don't think to negotiate. I come from a culture where everybody negotiates everything," says Hacopians, who's already planning his negotiation strategy as he upgrades from ATA arrays to the next generation of SATA arrays. He figures anybody should be able to knock the typical 18% annual service cost down to 10% or less. "It depends on your negotiating skill and your relationship with the vendor," he adds.
InteleNet Communications is also planning to purchase the latest generation of arrays packed with even more sophisticated features. EqualLogic is ratcheting up the pressure on InteleNet to buy support. "We may look at their support offering," concedes InteleNet's Stein. "A lot of it depends on how directly we can work with their firmware." But Stein adds that EqualLogic will have to cut its support prices if it hopes to lure InteleNet into a service program.
Storage vendors that maintain a third-party distribution channel automatically have negotiating room built into their support pricing, which allows the channel to add its markup. Ken Martig, director of IT infrastructure at a biotech company, usually purchases a three-year service program on top of any warranty. He recently turned over support contracts for approximately 30 infrastructure vendors, including ONStor Inc. and Sun/StorageTek, to Seattle-based Support Solutions Inc. Martig pays the same price as he would without the VAR. However, "Support Solutions does all the legwork and takes care of renewals," says Martig, which saves his IT group a big hassle.
If you're having trouble negotiating a lower service rate, you can try to negotiate other aspects of the service program (see "Pull the right negotiation levers"). "You may have better success negotiating a faster response time, say two hours rather than four hours," says Brian Schwarzentruber, a senior consultant at GlassHouse Technologies in Framingham, MA. Vendors usually charge a premium for the faster response. Or you might negotiate an extension of the free warranty period.
You can also apply negotiating pressure by bringing in more vendors and third-party providers. "I always go to multiple vendors," says Hacopians. As noted earlier, when IPAC switched its Sun service program to a third party, it didn't take long for Sun to come back with a more attractive offer.
Despite what most vendors claim, storage support costs are negotiable. "You have to consider everything--the acquisition, service and support, and operating costs," says Hacopians. Only then will storage managers get the best price.