I often get clients asking about warranties on their computer equipment. New equipment should come with a warranty that covers problems that arise from manufacturing defects. That could be a number of different things from a hard drive failure to a power supply that goes bad prematurely.
A warranty lets the consumer know that the manufacturer has confidence that the new product they are selling will not likely have these types of issues for a defined amount of time. And, if problems do occur, the manufacturer will provide the parts and services to correct those problems.
Should I buy an extended warranty?
I am generally not an advocate of extended warranties. I can hear IT companies all over screaming about how foolish I am for saying that. Let’s examine my reasoning for making this statement.
Recently I had a client tell me that their previous IT Services Provider said to them that they “were good” with their server hardware because they had purchased an extended warranty. They said they were covered for two more years.
Calling it “good” because you have a warranty on hardware seems like a very short-sighted opinion of their situation. It turns out that this client had budgeted for new server hardware the prior year only to have their “Virtual CIO” advise them to simply purchase an extended warranty instead.
They would save thousands of dollars, and I suspect this “advisor” would earn a fat commission. Pardon me if I come off as cynical, but seeing how some self-proclaimed experts take advantage of their customers gets me cranked up and annoyed. Okay, I’ll take a breath and calm down so we can evaluate this situation.
If it saves the client money, how is it the “wrong” advice?
I am all for saving my client money. However, I cannot make the cost today the only factor in what advice I provide. For instance, in this case, the server hardware was going on seven years old. Industry standards tell us to plan on replacing server hardware every 5 to 7 years, so it was time to start planning for that.
Additionally, you need to consider the software that is running on the server in question. In this case, there were virtual servers (VMWare) that were running the Server 2012 operating system. Support for Server 2012 ends in October 2023. It generally doesn’t pay to upgrade the operating system software on server hardware that is nearing its expected end of life. You will often find it makes more sense to take care of that when you upgrade the hardware.
Speaking of VMWare, that needs to be kept up to date as well. While there may not be any cost to upgrade VMWare, it will still require a carefully planned project and technical time. We frequently discover old, unsupported versions of VMWare running even on newer server hardware. To understand the extent of the risk of keeping outdated VMWare in operation, check out this article.
All of these upgrades would likely be included in a project to install new server hardware. In other words, there will be money spent to do these upgrades that would have been included in an upgrade to new server hardware. If you are going to do that in the near future anyway, it might just make sense to upgrade the hardware sooner than later.
What will an extended warranty cover?
An extended server warranty will mostly cover hardware failures. Components like hard drives and power supplies will fail over time. In most cases, an extended warranty protects against the cost of that hardware and might include a promise to ship replacement hardware overnight. Certain warranties will even provide technical labor to install the replacement hardware.
The downside to this is, these components failing could result in an outage. While many servers are designed with redundant hard drives and power supplies, not all have those features. What is the cost of losing access to a server while you wait for replacement parts to arrive and be installed?
The problem with extended warranties.
Extended warranties are a high-margin product. They always have been and always will be. There is almost always an underwriter of these contracts that understands that the chance of paying out more than the cost of the warranty is extremely low.
Another issue is these warranties are often offered with varying levels of technical support to provide the labor needed to replace covered parts that have failed. On laptop and desktop computers, this often means having to ship the computer to an authorized repair center. This can result in the computer being out of operation for several days.
Another issue is the quality of the service you may receive. I have witnessed a computer that had warranty work completed only to immediately fail again on multiple occasions. It is frustrating to the customer and to us as the service provider of that client.
When I would recommend an extended warranty.
There are a few cases that I would make for extended warranties or adding features to an initial warranty.
Servers:
Extending a server warranty beyond the standard initial 3-year warranty. With server hardware being so critical to business operations, keeping a server under warranty is often a good idea. I just would not spend money on buying an extended warranty beyond six years total for a server. You’ll be better off planning ahead and replacing that server at the end of those six years.
Computers:
Most computer manufacturers offer warranties providing extra coverage beyond the basic warranty that is included with a new PC. For instance, an option for faster service, on-site service versus having to ship a computer, or coverage for accidental damage and not just hardware failure.
Extra coverage options like these could make sense in adding. For instance, if you could not operate your business without your computer, it might be wise to pay extra to get on-site service within 24 hours instead of having to ship your computer in for service. Likewise, adding coverage for accidental damage may be wise on a laptop that is frequently used in the field and more susceptible to physical damage.
Ultimately, these types of warranties are like insurance to cover specific circumstances. Some people will want to comfort of these warranty options.
Warranty versus Support License
Some IT equipment will not only have a warranty but also offer a support license. It is important to understand that this can be a very different thing than a warranty. A support license can include software version upgrades, additional security features, access to expert product support, and more. These are often very important to keep in force so please do not confuse them with a hardware warranty.
A license for a firewall, for instance, can be the key to it being a very secure and powerful network component. Without the license, the appliance can be stripped of many of the features it offers. In these cases, the license is more important than the actual device. This circumstance is common with network connectivity equipment like firewalls and managed switches.
Planning the replacement of these devices is also encouraged. Most manufacturers will offer to renew a support license one year at a time. This makes it easier to develop a hardware lifecycle plan to keep your network running reliably and securely.
A sound warranty strategy for server and desktop/laptop computer hardware.
While most of this article argues against extended warranties, they do have their place in an overall IT hardware strategy. Most new IT hardware will have a base warranty and options for upgrading that coverage. Here are the general rules that I would apply regarding warranties in a sound hardware lifecycle plan.
General Guidelines for Warranties
- Servers should come with a 3-year, next-day on-site warranty when purchased new. If they don’t include this coverage, I would question the quality of the product/brand.
- I recommend extending your server’s warranty up to six or seven years of age and not beyond. Once you reach that age, hardware failures are much more likely and it is a better strategy to plan to replace it.
- Desktop PCs usually come with a 3-year warranty while laptops usually include a 1-year warranty. Laptops typically move around more and are, therefore, subject to physical stress than a computer that sits on or under a desk.
- I typically do not recommend upgrading the warranty on a desktop PC unless it is absolutely a critical device for running your business. This is probably more likely in a small business that doesn’t have a server where essential data and applications reside. If the device is mission-critical, consider upgrading to a warranty that includes next-day on-site support.
- It is a good rule of thumb to plan on replacing laptops or desktop PCs every three to four years. Trying to keep them going and spending money on extended warranties for computers beyond 3 to 4 years of age usually won’t pay benefits. Computers begin losing performance at that age, so just plan to replace them.
- To learn more about how aging computers and other underperforming IT can cost your business time and money, check out this blog.
We offer a free IT Planning and Budgeting worksheet that will help get out in front of IT spending. Contact us at success@rspn.com to request your free copy today.
