HP Looks for Critical Advantage in Support Services
As hardware maintenance services have gradually become commoditised, along with the hardware itself, vendors have increasingly sought to increase margins by packaging and selling higher-level services. Once upon a time (prior to the 1990s), when margins on computer hardware sales were still quite high, maintenance services were not always seen as a key source of revenue, but rather were considered a giveaway that were effectively bundled in with the product. However, times have changed.
Margins are substantially lower than in those good old days, and companies are looking to generate a separate revenue stream from services while positioning them as a point of differentiation. Packaged mission-critical services, where there is more scope to both add value and differentiate from the competition, has been a growth area, with many companies offering solutions. HP has been quite active in this market segment, and it recently introduced a new offering in its portfolio called “Critical Advantage”. So, what is “Critical Advantage”, and how does it compare and contrast with HP’s other Mission Critical offerings?
HP categorises its Mission Critical Portfolio into three segments. At the lower end, HP offers what it calls ‘Targeted Assistance’, which features the Proactive Select service. This is essentially low cost (relative to the higher services) “pay as you go” proactive support, whereby a company purchases service credits and trades them for specific services that they select from a menu, thus only paying for what it selects. At the high end is HP’s Mission Critical Partnership (MCP), which is a fully customized package that is tailored to a company’s exact requirements. In the middle is what HP refers to as its Comprehensive Support family, which includes the new Critical Advantage, as well as the existing Proactive 24 and Critical Service.
The Comprehensive Support services have elements of the MCP, in that customers have the ability to customise the support. However, Comprehensive Support services are fundamentally still packaged services, which offer the potential for some economies of scale for both HP and thus the customer.
The new Critical Advantage support offers many of the same features as Proactive 24 and Critical Service, with all offering access to reactive hardware maintenance services and software support, plus two levels of proactive support, including core and optional proactive services. There are some differences between the specifics at each of these levels. For example, Critical Advantage and Critical Service both utilize the Global Mission Critical Support Centre for premium remote reactive support ; the core proactive services for Critical Advantage are also different to those for Proactive 24. But IDEAS believes that the key differentiation of Critical Advantage over the other two is its flexibility and how it is priced.
From a structure point of view Critical Advantage offers a higher degree of flexibility. A site with Proactive 24 or Critical Service support needs all products under the same level of reactive support, whereas with Critical Advantage different products (servers) can have differing levels of support. So the main production systems could be under 24x7 hardware maintenance support, whilst other servers may only be under 13x5 coverage. But all of the products benefit from the proactive services available. Critical Advantage also comes with credits, which can be used to redeem from a list of proactive services. This enables customers a degree of flexibility to adapt the content of the service over the lifecycle.
The other difference is that Critical Advantage offers a lower entry price point than previously available with Proactive 24 and Critical Support. Proactive 24 and Critical are designed for large high-end environments and offer a lot of proactive services in the base offering. As a result they have, what is described by HP as a stepped pricing model, where there is a minimum entry price point required regardless of the amount of equipment on a site, which can be an inhibitor for some mid sized organizations. And of course being able to have varying degrees of hardware maintenance support also allows a client to lower its costs on the less critical systems in the installation, which is not an option with the Proactive 24 and Critical services.
Critical Advantage appears to be aimed at winning new business from clients who might not have traditionally considered HP’s Mission Critical services before. In fact, the initial technology scope for the offering will be HP ProLiant range of products and the associated storage, networking and software. However, there will not be a Critical Advantage offering for HP’s Integrity line of servers at this time. The Integrity product line is part of HP’s Mission Critical hardware platform, and IDEAS believes that is where the existing Proactive 24 and Critical services have a higher attach rate than in the ProLiant market segment. HP’s targeting of the ProLiant range is probably an indicator of its desire to encourage more ProLiant users into this level of service, especially now that virtualization has increased both the complexity and importance of these environments, which are running more mission critical workloads as a group than they probably would have five or ten years ago.
Each Critical Advantage client has an assigned Account Support Manager and Remote Support Account Advocate. And for those who choose the 6hr Call to repair support, a Mission Critical Hardware Specialist will be assigned. All Critical Advantage customers have access to the HP Global Mission Critical Solution Center. Critical Advantage offers three types of services. It has a base of reactive hardware maintenance and software support services, a core of proactive services which are delivered to all customers, and a menu of optional proactive services to choose from.
A client can choose from three levels of hardware maintenance: 13x5, 24x7 and 6-hour Call-to-Repair. Furthermore, as highlighted above, different products can have varying levels of these support options. In addition 24x7 software support is provided for all software covered by Critical Advantage. This includes HP Insight Manager as well as VMware, Microsoft Hyper-V, Red Hat Enterprise Linux, and SUSE Linux Enterprise Server, as well as Microsoft Windows.
The service includes a fixed set of ‘core’ proactive services. These include Account Management, Virtual and Physical technology review, Firmware and Software Revision Analysis and Remote Support Solution.
Finally, Critical Advantage includes seven optional flexible proactive services, which are aimed at Mission Critical x86 Virtualized environments, which is a key target market that can be purchased with credits. These include, Performance and Capacity Analysis for Virtual Environments, Virtualisation readiness Workshop for Critical Applications, Availability Analysis for Virtual Environments, Software Licence and Hardware Asset Inventory, Insight Control Power and Thermal Monitoring, Security Review for Virtual Environments and finally backup and Recovery Workshop for Virtual Environments. In addition to these the full menu of Proactive Select services can also be purchased.
Go to Market
HP will offer Critical Advantage either as a contractual service, or as “Care Packs”. When delivered as Care Packs, a Critical Advantage Care Pack is purchased for each product covered, which will include the reactive support and core proactive services, as well as some credits towards the optional proactive services. The larger the installation is in terms of the number of servers that are covered, the more credits that client will accumulate. This way, the need for proactive services will scale with the size, and hence complexity, of the site. On the flip side, this also means the entry point for smaller and hence less complex installations, is lower too, which appears to be a key design consideration with Critical Advantage, that of appealing to a new set of clients. Finally, if a customer needs more proactive services, then it can simply purchase more credits in the same way a Proactive Select customer can today.
IDEAS Bottom Line
It is worth noting that HP’s existing Proactive 24 and Critical Service offers remain in the portfolio, and HP will offer them alongside Critical Advantage, as many larger installations will still find these services meet their needs. However, in the current business environment, where services now need to be a profit centre along with the hardware, HP’s new segmentation can be the key to open up new lines of business. HP’s new Critical Advantage package will clearly appeal to a market segment that previously might not have considered its level of service.
By Gary Burgess
Gary Burgess is SVP Research & Operations at Ideas International and specialises in IT hardware research, including features, performance, Green IT, and pricing as well as IT Infrastructure Support Services research.
Ideas International Limited (IDEAS, IDE:ASX) is an analyst company that provides enterprise IT research, insight, analysis, and tools to both the buy and sell sides of the industry, counting as clients many large technology vendors and major blue-chip global IT users. More information at www.ideasinternational.com