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36
OPERATIONS

Service Contracts
 

Complete guide to choosing office equipment vendors purchasing service contracts.
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Whether you need a service contract or not depends on which equipment is critical, and what your vendor has to offer.

Your employees are finally comfortable using your company's new computer system, and you can tell they are being more productive. And even though they're still making copies of their faces on the new copy machine, they're spending much less time standing around, because it's so much faster than that old clunker. You sit back, relaxed, and pick up the phone to call your old buddy, so you can brag about how great your new office equipment is.

But wait -- your assistant runs in and announces that the computers have just crashed! And all you hear on the phone is an awful clicking!

Uh, oh. What now?

That won't happen the first day you install your new office equipment, but no matter how much you spend on it, it's bound to break down sooner or later. Choosing the right service contract is as important as your choice of machines, and you should go about shopping for service with just as much care.

Service contracts are basically insurance policies. The key is to decide what you need and buy only that. This analysis is rather simple. Go through your equipment a piece at a time, and decide how critical each is to the operation of your business. Can you live without it for four hours? A day? A week? If you run a telemarketing firm, for example, you cannot tolerate your phones being out for even two hours because you will lose orders. If you provide computer design services or publish a newsletter, you will lose valuable time if your computers crash and are not restored quickly.

If you decide to go without service contracts, you will save some money, but also take some risk. To help speed repair when you do have a problem, make a list of service people in your area, call them for references, and check them out. Then when the inevitable happens, you will know who to call and have some idea of what repairs will cost.

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If you cannot risk downtime, you can ensure fast repair by purchasing service contracts. But don't feel bound by the terms of these deals. A service contract can and should be negotiated like any other business agreement. Owners should clearly specify the service they want; the best contracts cover parts and labor, guarantee that a service person will respond to a call within a stated time, and provide for loaned equipment if a major repair is needed.

Response time is a big issue. Be sure to indicate whether the serviceman is to show up at your doorstep in two, four, or eight hours, these being the usual standards. (Remember, eight hours may often mean the following day.) Your contract should include financial penalties if the serviceman doesn't make it on time. Penalties range widely but should be stiff. They are usually included only at the insistence of the equipment buyer, and you should insist. If a service vendor won't agree to a penalty clause, then don't use him -- his technicians probably won't show up on time.

Service contracts can be purchased from manufacturers, certified dealers, or independent service firms. Who to use varies with the equipment you buy. For phone systems and copiers, stick with your vendor, since one manufacturer's vendor will not work on another's equipment. Most computer dealers, on the other hand, offer service for all the brands they sell. It's important to ask if the dealer is certified by the manufacturer to perform service, however; if not, you may have to wait for parts and may not get the best repairs.

Third parties may offer cheaper or faster computer service than dealers and manufacturers, and are worth considering. There are many independent firms, such as TRW and Intelogic Trace. Many of them specialize in one technology, though, so make sure you're playing to their strength.

Be sure to shop around. You wouldn't buy equipment from the first store you walked into, and the same goes for service. Compare at least three companies. Ask each how long it's been in business and how many trained technicians are on staff. Make sure the technicians have years of experience working on the brand of equipment you buy. Ask for several long-standing references, and call them.

Beyond these general considerations, there are other factors specific to the equipment you plan to cover. Which machine parts break frequently? What prices are typical? Should routine maintenance be included? Advice on these and other concerns follows.

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Computers

If computers are critical, a service contract is a good idea. The parts most vulnerable to breakdown are the hard drives and floppy disk drives, which store information in the computer. Also vulnerable are the keyboard, power supply, and monitor, in that order, according to Dan Hansvick, president of Logic Plus Inc., in Chicago, which specializes in systems integration and service. Therefore, your service contract should expressly cover these parts.

Before buying a contract, consider whether you need service for every piece of computer equipment. If you have four standalone workstations and all are vital to daily transactions, you cannot afford to have one down.

If you have 10 personal computers linked to a central processor, you will definitely want a contract for the processor. But you may not need to cover the 10 PCs. If you can get along with nine for a few days while one is being repaired, you may want to rely on an equipment warranty instead of paying a few hundred dollars for service.

Warranties are useful if they cover parts and labor (if they don't, don't buy the machine). With a warranty, you have to bring the defective unit in to a qualified dealer, but most dealers can make repairs in a few days. However, most warranties last for only one year. It may be a good idea to extend the warranty to three or five years. This usually can be done for minimal cost, roughly $5 to $10 for $200 in value -- well worth it. Since most small computers are not designed to last more than five years and will probably be outmoded before then anyway, an extended warranty may be sufficient.

The annual cost of service runs from 2% to 10% of the equipment price. For 2%, you'll probably have to drag the machine into the dealer yourself; for 10%, expect a repairman at your door within six hours. In rural areas, this may run 30% more, but in general, if someone is asking more than 10%, keep looking.

* * *

Copiers

Service is a must for copiers. Though less critical to most offices than computers or phones, copiers break down more often because they have many parts that get dirty. Regular cleaning, a basic part of a service contract, can prevent problems. If you don't have a contract, a repair person will be expensive.

Copier service usually includes from 8 to 18 regular maintenance visits a year, depending on the number of copies your machine is rated for. During the visit, the technician will clean all parts, refill toner, and make mechanical adjustments. For breakdowns, a four-hour response time is the industry standard.

If you have an inexpensive desktop copier, you may opt not to pay for service. If so, be sure the vendor trains someone on your staff in how to do routine maintenance, change toner, clean basic parts, and fix minor problems like paper jams. Most vendors will provide brief training for free if you push for it (before you sign the check).

Otherwise, prices are usually based on the number of copies you make a year. Typically, service will run $750 a year if you make less than 50,000 copies annually and will increase from there.

* * *

Faxes

For fax machines, service strategy depends entirely on the fax you buy. There are two varieties: those that print on thermal paper or on plain paper. "Thermal fax machines are so reliable that it is hard to justify a service contract for them," says Bob Wescott, owner of Copilabs Inc., in Lawrence, Mass. And since a contract will cost around $225 a year and a basic thermal fax costs under $1,000, service is hardly worth it.

Plain-paper faxes cost more and have many of the same problems as copiers, since they use toner. Like a copier, they need regular maintenance and tend to break down. So service for these machines may make sense.

* * *

Phone systems

Phones are probably taken for granted more than any other office machine, and they do rarely fail. Switchboards, phone networks, and central control units such as PBXs are much more troublesome, however, and today it is hard to operate without a phone for very long. That means service is a necessity.

If you buy equipment directly from AT&T or another major company, on-site service the same day for major failures, is usually standard. Be sure to find out which specific components are not covered, and cover them with an additional contract. You may also want to pay for two-hour service, or for the adding or moving of phone outlets.

Contracts vary considerably. "I've seen agreements that cover from everything to nothing," says Frank Ferrall, whose Telspan International, in South Windsor, Conn., sells equipment from many manufacturers. Typically, service charges run from $3.50 to $7 per port.

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Alyssa Lappen is a business writer in Brooklyn, N.Y.

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(continued)


SMART TIP . . .

A service contract should provide for stiff financial penalties if a service person does not respond to a call in a specified amount of time. Vendors rarely include penalties in their contracts; you should write them in yourself.



HOW TO PICK A VENDOR


Your service agreement should:

* Specify which parts and labor are covered.

* Spell out how fast service people will respond, and stipulate penalties if they are late.

Key questions to ask:

* Computers: Can extended warranties adequately cover some machines?

* Copiers: Have you planned for enough routine maintenance visits to prevent problems?

* Phone systems: Do you need additional coverage for minor problems, such as a faulty phone?

* Faxes: Is service even worth it? Most faxes are cheap enough to replace.

Last updated: Oct 1, 1991




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