Special Focus
Gimmick or Game Changer?
Lifetime warranty is currently being pawned by networking vendors as a differentiator in gaining mindshare among partners and customers. But is it really going to be as pivotal?
By Tabrez Khan
At a time when customers are increasingly scrutinizing the TCO of their IT infrastructure, warranties and after sales support are factored in as crucial differentiators in networking product sales. Lifetime warranty (LW), which promises to offer repair and replacement over the lifetime of a product, is seen as one such differentiator.
No wonder networking players across the spectrum including HP ProCurve, 3Com (to be acquired by HP), D-Link and Extreme Networks are increasingly warming up to the LW concept. While ProCurve has been offering LW on its networking gear for more than a decade now, D-Link, Extreme Networks and 3Com are more recent converts to the LW concept. Market leader Cisco is the only player that seems unaffected by the rising clamor for LW.
However, is LW really a game changer or is it merely a mind game that networking vendors indulge in to gain mindshare among partners and customers?
Different opinions
Indian channel partners have varying views on the impact of LW on vendors’ business, on customers’ TCO and on their own revenues. Some partners foresee realignment in market shares to some extent due to the impact of LW in the future.
For instance, a Cisco partner claims offering LW may have helped HP ProCurve steal market share from the market leader Cisco. “We can feel the impact of the LW to some extent. In some instances, we were forced to sell ProCurve gear instead of Cisco’s, despite not being a HP partner. The only differentiator seemed to be the LW offered by ProCurve,” says the partner.
Another Cisco partner, Kaybee Infotech agrees with this. “There have been a few very large green field projects where ProCurve gave guarantee letters to customers in order to convince them that their LW is not a gimmick and there are no conditions attached to it. As a result, they won those projects,” said S Krishnan, Director, Kaybee Infotech.
Cisco products are generally priced higher than competitors, and the fact that customers need to shell out money to extend warranty deters some cost-conscious customers.
“Cisco products generally come with a three-month limited warranty, and customers have to buy a warranty pack after that to extend the term of the warranty. Some cost-conscious customers could see that as a deterrent to adoption,” says Rajesh Mehta of Geo Integrators, a Gujarat-based networking solutions provider.
But Cisco is not too perturbed by the LW issue. Although, based on partner feedback, the company has introduced LW on some of its products. “Cisco does offer limited LW on a select list of products like Cisco Catalyst 3560-E, Catalyst 3750-E, Catalyst 4500, and Catalyst 4500-E Series and is also expanding the breadth of products offered with the limited LW,” says GB Kumar, Senior Vice President, Cisco Services, Cisco India and Saarc.
“However, a warranty just gives you a factory replacement of the product,” adds Kumar. “Cisco goes beyond that to offer service contracts that give customers direct access to our Technical Assistance Centre and to services such as OS updates, online technical tools and resources, proactive diagnostics and alerts on select devices and hardware replacement in as little as four working hours, compared to as many as 10 business days with standard warranty coverage,” says Kumar.
However, not all networking vendors agree with that assertion and LW to them is a crucial game changer.
D-Link for instance is a staunch although recent convert to the LW fold. Jayesh Kotak, Vice President, D-Link India asserts that introduction of LW may have helped him garner incremental sales since they introduced it recently. “LW does create a positive momentum, and is a definite assurance of quality to customers. We have recently widened our LW coverage, and I believe 10-15 percent of our incremental sales have been aided by this,” says Kotak.
But Kotak argues that LW in the long term can only be one of the factors and not the only factor in attracting customers to a particular networking equipment brand.
Just another value add
Partners also opine that LW is just one of the factors in the value proposition that a networking product vendor can offer, which includes a solid product and good technical support apart from warranty.
“Cisco may not be making a big noise on LW but its technical support is great. Customers can avail of it within one hour of reporting their complaint,” says Mehta.
Arun Gupta, CEO of Darts IT Networks, a Cisco partner, agrees that a leading player like Cisco will not be impacted by just the introduction of LW by competitors. “There have been other cost-effective products earlier too which offered lifetime warranties, but they haven’t done well. ProCurve definitely has the potential to erode Cisco’s market share. However, that may not be only due to LW but because of their product quality, price competitiveness and brandname,” he says.
Some partners consider LW a marketing gimmick, given the fact that lifecycles for networking equipment are short. “The product lifecycle for networking products is maximum three years, so standard warranties should suffice,” says S Nautiyal, CEO of Spark IT, another Cisco partner. “LW by players like ProCurve may be more of a marketing gimmick,” he adds.
Part of the reason why LWs are not seen as so crucial differentiators yet may be the way they are structured. D-Link’s lifetime warranty terms, for instance, states that its business products will be covered by the LW for as long as the product is owned by the original customer, or up to a period of five years after the product’s discontinuance, whichever occurs first.
It is fine print like these that makes LWs appear more as gimmicks to some partners rather than as a genuine effort by vendors to sell more value added products. “Real life-time warranty should not involve too much effort in chasing (the vendor), as well as time delay, which takes away the benefit of life-time warranty, as has been the case with some vendors,” avers Gupta.
Kotak, however, disagrees with the opinion that vendors’ LW documents have fine print that could mislead customers. “There’s no fine print here,” he quips. “The usual product lifecycle for a networking product is five years and we offer LW for that period. We have a strong network of 26 support centers throughout the country, where we carry out repairs and replacements. Also we have a portal where customers can register their products and keep track of the status of their LW.”
With the passage of time, keeping track of the LW documentation of a product becomes difficult. People leave the organization and new people join making it difficult for them to track the LW status, therefore a portal that documents and tracks the LW status is very handy for customers, according to Kotak.
Services squabble
Partners also fear that LWs may negate their services revenues. Citing his own case, Gupta says, “For products like D-link or HP ProCurve, we hardly had any service revenue as such, and sometimes the service revenue on a Cisco switch exceeded the price of a cheaper equivalent product.”
Pandya agrees with the assertion adding that in his own case he is assured of service revenues after expiry of the three months warranty period on Cisco products. “I can sell the warranty extension packs to customers, after their warranty expires. In case of an LW, that part of my business revenue will disappear,” he adds.
Kotak agrees LW may have some impact on service revenues of partners initially. However, he adds, LW may be conducive to a more long-term association of the customer with the partner. This could create a positive association and lead to incremental business for the partner which would not be the case with limited warranty products, he claims.
“I think in the long-term partners stand to benefit in terms of a stronger relationship with customers,” adds Kotak.
Notwithstanding the arguments for and against it, with the trend towards more value added services and products, LWs are likely to find favors with customers due to their TCO lowering potential. However, product improvement and robust technical assistance will be key prerequisites. After all, the proof of the pie is in the eating! |