Covid-19's Impact on the Hardware Industry
Updated: Feb 22
When the pandemic caused companies to shutter their facilities, we saw IT teams scramble to supply a work-from-home infrastructure. Some customers needed more personal devices – PC’s, tablets, and monitors. Others signed new contracts with Zoom, expanded their WebEx capacity, and/or ramped up a Virtual Desktop Infrastructure.
But the buying frenzy soon cooled down, and as the weeks turned into months, customers focused their attention on cost cutting. They delayed hardware refreshes, and new projects were put on hold.
With hardware, a lot of the ongoing spend is related to maintenance. Not surprisingly, clients began taking a closer look at their inventory. Many began to analyze what was actually deployed and in need of maintenance, and how they might reduce their maintenance levels. In some cases, they discovered that they could simply support their products via hot spares and skip maintenance altogether.
Customers also looked to third parties like Curvature and Park Place to support their non-critical infrastructure and found significant savings opportunities. They discovered, too, that these third-party options could be used as a competitive threat to improve their OEM support costs – these suppliers do not want to lose any business during this uncertain time.
Many clients have reached out to us for help opening contracts early, in hopes of reducing costs. However, unless the agreement is up for renewal, hardware vendors are not receptive to conversations regarding reduced run rates. As a result, many customers will end up eating the cost of expected growth that may never come to fruition. The only thing a customer can do in these instances is prepare for their exit or future renewals.
If you have a new spend, you can really take advantage because at this point in time, leverage is on your side. Suppliers are hungry for business and will fight to win it.
We are seeing all suppliers increase discounts much more quickly now, whenever competition is introduced. Additionally, we have seen Cisco tacking on additional discounts for “Covid relief”; DellEMC and HP are offering deeper discounting than usual on their servers; and DellEMC is showing flexibility on reducing customers’ maintenance run rates when other net new business is on the line.
Corinne Boyles is a Senior Analyst at ClearEdge focused on networking and security.
This blog post was inspired by the webinar about the continuing impact of COVID-19 on IT spending. You can access the full recording to this webinar below. To learn more about SAP audits, stay tuned for part four of this series or contact a member of the ClearEdge Compliance team.