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Matt Blachford

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October 9, 2020

Are maintenance agreements worth it?

It’s really easy to do the simple arithmetic to justify the tangible cost of investing in a maintenance agreement from your trusted field service provider.  Just add up the number of time and materials (T&M) charges on your invoices over a set period of time and compare it to the maintenance agreement proposal submitted by your service vendor. In many cases it will seem less expensive to stick with a T&M relationship, but comparisons done in this fashion are for “surface” tangible costs and are most likely not an accurate cost of doing business comparison.

Let’s look at a couple of costs that could be hidden under the surface that are worth looking into.

1) First, reduced downtime will lower losses, speed-up investigations and decrease liability.

Since NAVCO’s Maintenance Agreement customers receive priority response, most service calls are resolved within 24-48 hours, whereas T&M customers typically wait 1-2 weeks for their service calls to be resolved. So, if a company with 50 locations averages 2 service calls per site annually, then the total system downtime would be about 100 weeks for the 50 locations. Obviously, a lot of bad things can happen during that period of time which will increase your losses and liability.

2) Second, it is in the maintenance agreement vendor’s best interest to incur as few service calls as possible.

Therefore, the entire system is checked and made functional during each service call. For this purpose, technicians are supplied with all necessary parts and equipment to accomplish a first-time-fix before they are dispatched to your location.

For T&M based service calls, technicians typically only repair the faulty component referenced on the service request, and then exit the premises. Frequently, a billable return trip is required.

Using the account example above, let’s compare costs in the chart below.

We can only guess how much total time is required to process 100 annual service invoices (from receipt, analysis, dispute resolution, accounts payable, and then verifying payment.) A conservative guess might be around 100 hours, and that is just the administrative costs! Compare the cost of those 100 annual invoices to the cost of just a single invoice for a maintenance agreement. It’s not possible to accurately budget T&M costs. Normally, it’s a “guessed cost” process based on history.

In contrast, budgeting maintenance agreement costs, done annually, is quick, simple and accurate.

Pricing on NAVCO maintenance agreements is far more negotiable than on T&M agreements. And pricing becomes even more desirable when adding additional technologies such as alarm or access control systems to the maintenance agreement. It’s common for NAVCO maintenance agreements to include preventative maintenance calls, lower labor rates for covered component updates, site surveys & drawings, on-site customer training and other value adds. All of which would be billable services with T&M relationships.

Whichever route you choose, if you’re having a difficult time tracking service calls, service level agreements, cost and history, and trying to guess how many hours a year are spent on that, there is a simple solution.  All NAVCO customers receive free access to NAVCO’s Customer Portal for service and maintenance. View all pertinent service call and installation information in a simple format. Our free portal also enables customers to request service, thereby eliminating the need to email, fax or phone in those service requests.

The NAVCO sales team with nationwide coverage would be delighted to discuss these ideas and build a non-biased comparison for your company’s service needs. Then you can make an informed decision as to whether a maintenance agreement is right for your business.

 

Matt Blachford has been with NAVCO for more than three decades and has a proven track record of sales excellence during his tenure. Matt’s current role of EVP/National Account Manager focuses completely on managing and supporting NAVCO’s largest customer.  Recently Matt has renegotiated a new 5 year agreement including maintenance with said customer insuring steady business into the future.