Banking

Create hardware and support payment packages for clients

IT consultants may want to present clients with this option: one monthly payment that covers hardware replacement and support costs. Find out why Erik Eckel says it's a win-win proposition.

Experience is an outstanding teacher, which is likely why English poet George Chapman wrote "young men think old men are fools; but old men know young men are fools." IT consulting, like life, makes practitioners smarter with age.

When I first began consulting, I missed an important fact that your IT consulting firm might also be overlooking: Some clients seek to wrap hardware expenses and support costs into one monthly payment.

Think about it.

If you're a manufacturer, a law firm, an accountant, a physician, or other professional, your goal is to build a strong business. Strong businesses are built by overcoming common challenges, which include hiring, training, marketing, and cost control. Many business owners don't want to lose time reviewing hardware specifications, ordering equipment, unboxing computers, connecting cables, installing printers, and performing similar tasks. That's why they hire you.

One monthly IT payment

IT equipment doesn't last forever; in fact, computers are more expensive to support the older the machines get, which is why accountants usually amortize PCs over a three- or four-year period. Lifecycles are finite, yet most business owners find it a struggle to write a large check once every three or four years to replace all their desktop computers, laptops, and servers.

Forward-thinking IT consultants can help business owners avoid that very problem by presenting them with an alternative: one monthly payment that covers hardware replacement and support costs. This type of contract helps business owners level their technology investments, reduce downtime, and improve efficiencies. An added bonus is that clients on such contracts will find it much more difficult to change IT consultancies.

Cost structure examples

Say a client pays a retainer of $1,000 a month for approximately 10 hours of support and maintenance per month. Over three years, that client will pay $36,000 in support costs for services covered under the retainer. The client is faced with the prospect of replacing a server and 10 desktops every three years, which means they would get an additional $9,500 bill for equipment replacement every third year (assuming desktop replacements run $600 each and the server expense is $3,500). That's pretty steep, especially compared to the monthly technology bill the client is accustomed to paying.

A larger client with a $2,000 retainer, 50 machines, and three servers would need to write a check for $40,500 every three years to replace those systems. That's a big bill, the total of which might cause many business owners to simply skip it, roll the dice, and try their luck with their existing equipment.

But by wrapping the hardware costs into a single monthly payment on top of retainer support costs, the small business with one server and 10 workstations would only increase their monthly bill by $263 and change. The larger company, with 50 desktops and three servers, would see its monthly bill increase $1,125, yet they'd never again have to fork out $40K in a lump sum payment for new PCs.

This isn't for everyone

Some clients simply won't consider wrapping lifecycle costs into one monthly payment; clients who recognize the value of the payment structure enable your IT consulting firm to better maintain smooth operations and prevent downtime and data loss. If three-year warranties are selected when ordering the replacement systems, too, clients (and IT consultants) will receive additional confidence knowing that any hardware failures that do occur will likely be covered under warranty by the manufacturer.

You'll never know whether a client sees the value in the single monthly payment plan or not unless you ask. The next time a new client discusses support and maintenance contracts with your firm, be sure to offer pricing estimates that include regular hardware replacement as part of the contract. Clients choosing that option will experience smoother operations, and your firm will receive a source for regular new orders.

This win-win proposition might not be apparent to younger consultants, but industry veterans will know it all adds up.

Get weekly consulting tips in your inbox TechRepublic's IT Consultant newsletter, delivered each Monday, offers tips on how to attract customers, build your business, and increase your technical skills in order to get the job done. Automatically sign up today!

About Erik Eckel

Erik Eckel owns and operates two technology companies. As a managing partner with Louisville Geek, he works daily as an IT consultant to assist small businesses in overcoming technology challenges and maximizing IT investments. He is also president o...

Editor's Picks

Free Newsletters, In your Inbox