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| Gartner Dataquest Says Less Than 30 Percent of PCs Installed Generate Support Revenue |
| Many Opportunities Exist for Sellers of Support Services as Users Increasingly Seek External Sources for IT Support |
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LOWELL, Mass., December 5, 2001 - Even as enterprises increasingly look to external service providers for IT support, a survey by Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB) shows that only 28 percent of installed PC units produce any revenue for external support providers.
Desktop PCs generally have a three-year warranty with an average next-business-day response coverage. This is acceptable to many end users and accounts for the fact that almost 43 percent of all units installed are covered only by the standard warranty period and coverage. With the percentage of self-support for many product sets remaining relatively high, vendors must establish programs that focus on one of two strategies. "The first strategy is to target self-maintainers with a sales pitch that proves it is more cost-effective and efficient to have support delivered by an external organization," said Eric Rocco, vice president for Gartner Dataquest's IT Services worldwide group. "The second strategy is to establish a formal program that allows a coexistence with the self-maintaining community by selling training, certification, and parts." The decision to buy support at the time of the initial product sale depends heavily on the attributes of the product. The survey showed that those products that have higher levels of criticality to an organization are more likely to have post-warranty support sold at the time of initial product sale. Mainframes, midrange systems and PBX units top the list. On the low end are network hubs with a 12.2 percent attach rate at the time of initial product sale. "IT services companies must realize the impact of the old adage that it costs 10 times more to develop business with a new client than to generate the same level of new business with an existing client," Rocco said. "Therefore, investment in sales programs that will increase service attach rates will open the door for significant future sales opportunities for services and products." Manufacturers of hardware products need to enable their salespeople to understand how to sell services and then lock in support revenue at the time of the product sale. Incentives for sales in selling support contracts are key. Create incentives for sales at the time of product sale. Some companies offer as much as double credit to the sales rep for selling extended warranty. IT services companies should also leverage special offers and promotions best practices from other industries to increase attach rates. Although short-term margins will be affected negatively, the long-term impact of new sales opportunities resulting from the strengthened relationship will far outweigh it. Additional information is available in the Gartner Dataquest Focus Report "Hardware Support Sales and Attachment Rates: Squeezing More Milk From the Cash Cow." This report maps the results of a manufacturers survey and an end-users survey in terms of manufacturers' support sales experiences and what users report is their overall coverage. This information is produced by Gartner Dataquest's IT Services group. This group provides a complete picture of the IT services industry, including network integration and support, hardware services, consulting and system integration, outsourcing, life cycle service, strategic partnering and services marketing, software support, and vertical markets, including communications, education, financial services, government, healthcare, manufacturing, and retail. To subscribe to one of Gartner Dataquest's IT Services programs, please call 408-468-8000. Reports can be purchased on the Internet at www.gartner.com. Gartner Dataquest is the recognized leader in providing the high-technology and financial communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, and services sectors of the global information technology industry. Gartner, Inc. is a research and advisory firm that helps more than 11,000 clients understand technology and drive business growth. Gartner's divisions consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner, Inc. is headquartered in Stamford, Connecticut, and consists of 4,300 associates, including 1,200 research analysts and consultants in more than 90 locations worldwide. The company achieved fiscal 2001 revenue of $952 million. For more information, visit www.gartner.com. |
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Contact: Danielle Westling Gartner 203-316-6754 danielle.westling@gartner.com |
