AMC debate: Can it be solved?

SO now when we know for sure that a CIO finds AMCs expensive and also that a vendor substantiates them as valid, what’s the solution if any?

Many, it turns out when one asks around.

Analyse them, standardize them, to start with.

“I would say the insurance policy terms exactly apply here; you pay more when you actually claim for it.” tells Vishwajeet Singh, National Manager, IT, FCm Travel Solutions (I) Pvt. Ltd.

“Today it is like a mandate that you need to cover all the items under AMC to prevent any future breakdown but it is not necessary that everything will actually require your attention. We can do a pro data basis cost analysis and give the benefit to the corporate for their effort in keeping equipments under healthy atmosphere.” He adds.

The same can be applied on the applications we use, how many times do we actually upgrade or update these until there is a major release.

On the other hand is a recommendation from Manjit Singh Bimra, Dy. General Manager IT, Information Technology Center, Tractor Engineers Ltd.

As a CIO his suggestion is to standardize the AMC Charges on Expensive IT Systems through relevant national/International IT bodies, forums, organizations. “Some In-House AMC partners at Corporate level has taken this initiative.”

Ten to 15 per cent of license value is a high AMC component, and according to Bimra, taking into account the vendor-side recurrent hike in these percentages every year, takes its toll on CIOs. He suggests that there should be some common forum where vendors should come and standardize the rates, for clarity and simplicity. “It would be good for everyone,” he adds.

Arun Jain, director, Premium Bars, a manufacturer of TMT steel bars that produces over 450 tonnes of steel per day too suggests that licenses should not be mixed with AMCs and there should rather be a standard fixed cost earmarked for AMCs. "That way upgrading licenses won't be painful."

But Asheesh Raina, principal analyst, Gartner, does not quite agree.

“Every company works differently since each one has a different R&D approach. So it should be left to the discretion of the company and a mutual settlement with the CIO concerned, based on adequate discussions.” Raina explains.

As to standard rates, Yogesh Agarwal, CP, Command Central product group, Symantec says that across companies rates are mostly driven by the market.

Ask him, the potential of pay-as-you-go models as a possible solution out of traditional license models and he says that it really depends on a customer’s needs. “For someone who is not sure of the Budget and would love flexibility, that’s a good option.” As to others, there are other options that stay.

“We offer both. Perpetual models have a maintenance component for regular upgrades. Subscription-based model is a different one and there one is not exactly entitled to changes. Again it depends on what a customer wants.”

Gartner principal analyst Asheesh Raina suggests technology improvements and interoperability efforts too, so that customers feel free to go from one vendor to another.

Also, one good way to address the AMC issue in a balanced way is to approach them properly during SLAs (Service Level Agreements) framing and drawing up various terms and conditions. “One way is adequate discussion on maintenance clauses and negotiating accordingly while one outlines the contract.” He even suggests an approach, which might be maverick but can come handy. “Performance-based systems can be tried out as well.”

While all these are various suggestions mushrooming out of the quagmire that CIOs call AMCs, there are broader evolutions running in parallel. New concepts that even if not disruptive to traditional models, but novel enough in comparison, can be seen emerging. Software as a Service, Pay-as-you-go, utility-based pricing models are coming up as alternatives to license-formats. At the same time, new concepts like Proactive Services and self-service support as well as automation, are challenging the characteristic service support models.

Periodic health checks and proactive assessment instead of incident- based support is something Microsoft is experimenting with. Vikas Arora, director, Enterprise Services, Microsoft India, shared in an interview earlier that the dynamics of technology maintenance are changing in the economic downturn.

“Even while hardware cost/performance has quadrupled in the last few years, what's interesting is that the percentage of IT Budget allocated to mere maintenance remains at more than a whopping 75 per cent. All enterprises today want to improve their IT infrastructure and make optimum usage of it from the perspectives of cost, risk, security and operational agility. Until sometime back, 80 per cent of CIOs relied on reactive IT support to help rescue their infrastructure from any breakdowns, today there is a shift towards proactive IT support.” This is a service flavour that customers are getting extremely keen on, as Arora told.

Commenting on these new avatars Raina from Gartner says, “Though am not much aware of the proactive models, it’s a combination of the new and old and not something actually novel. Every company has different ingredients to an AMC model. For some, it’s call centre-based support, for some community, for some it is proactive maintenance. As to SaaS, I don’t see them as maintenance models, but delivery models.”

He adds the Internet bandwidth problems that India still faces as another issue to reckon with. In fact, he cites that for an enterprise where mission-critical or scaling-up systems are the ones in question, a pay-per-use would rather prove more expensive than a perpetual model. “SaaS, is good, in technical point of view, pricing apart. A CIO does not have to bother about taking care of a system.”

Ask Microsoft's Arora on how disruptive can proactive IT be to the typical AMC model and he answers, “There are two components to the model. First, it can be need-based for any high-end problem resolution that is scaled up to us. Second is a routine one. In fact, if it's not routine, it's not proactive. It can be a yearly support which most customers renew. The AMC format is still very much there. This model overlays and implements over that across platforms.”

MS proactive IT offering can also be a separate choice that is not tied to license model. These services essentially overlay on the customer's MS layer and come into picture for mission-critical problems with high-response needs urgently calling for correct resolution, he adds.

Meanwhile, CIOs have their own ways of solving the AMC conundrum.

“We always try to play here and there to somehow reduce the cost. We stick to one brand for one type of equipments and it gives leverage to reduce the cost, otherwise it can cost huge.” shares Vishwajeet Singh National Manager, IT FCm Travel Solutions (I) Pvt. Ltd.

Nevertheless, the AMC partner should be competent, which is lacking with many, Bimra points out.  However the ‘Supervising Role’ on AMC partner should necessarily be done by the IT Product Vendor for assured customer satisfaction.  Some Non-IT reputed companies have this framework in practice.”

Now, solutions or no solutions, are AMCs deterrents or a necessary evil?

Singh concludes it perfectly.

“It is, you can’t ignore this. Today everything has defined timelines and it is directly attached to your KRAs. You can’t afford to have downtime and this is the main reason where OEMs get the advantage. But yes, this can be controlled with proper analysis of the equipments available and your total dependencies attached to that.”

“Let’s hope for the best deals coming in.” the CIO inside keeps wishing.

What do you think? Is the debate over yet?