Buying Hardware from Your MSP vs. Popular Retailers: Costs & Benefits
Be prepared for some sticker shock the next time you go to replace hardware in your business. Computer component costs have gone up 20% to 40% since 2020. Business-grade PC prices have doubled since 2019, thanks to the perfect storm of inflation paired with increased demand and decreased supply.
In 2019, Innovative sold an average, commercial-grade desktop computer for around $900. Today, desktops go for about $1,600. And that's nothing compared to the increases in laptop prices. In 2019 we sold a business-grade laptop for around $1,000. Today that same quality laptop is about $2,000.
Need a high-performance laptop, one that runs CAD or video-editing software? That cost you around $2,100 in 2019. Today, expect to pay about $4,000 for a similar device.
Long story short, start adding at least a 20% inflation contingency to your future IT budgets. You're likely to need it no matter where you purchase your hardware.
When you get a quote that's nearly double what you paid for your last hardware refresh, it's natural to try and shop around a bit. And you may find seemingly similar equipment at lower prices elsewhere. But before you start scrolling through Amazon, consider the benefits of purchasing hardware you’re your managed service provider (MSP), including less risk on your end and lower install fees.
As an MSP, Innovative has some obvious upside to selling you hardware. But our motivations aren’t purely selfish. You get some pretty significant benefits and long-term cost-saving opportunities by purchasing hardware from your MSP, even if you end up paying a bit more for the hardware itself.
The details in this article apply specifically to Innovative's labor rates, purchasing processes, and loaner equipment availability. But the overall benefits could apply to any MSP. If you're not an Innovative customer, be sure to ask your MSP how they handle hardware projects and purchasing along with these 20 questions to ask MSPs.
Why does Innovative's hardware sometimes cost more?
Scale. While Innovative buys more hardware than the average business our size, we're small potatoes compared to the Amazons, Best Buys, and Staples of the world. Those retailers get a lower cost from manufacturers due to the mass quantities they can purchase, and the efficiency of human resources is greater at a larger scale. For example, one employee can order 20 PCs in the same amount of time as they can order 2,000 PCs.
You already knew that, though. You believe in shopping small and supporting local businesses, and you know that comes at a premium. But when you find seemingly similar PCs on Amazon for a few hundred dollars less than Innovative's price, you start to care a little less about your fondness toward Innovative.
So why pay more to buy hardware from Innovative?
Yes, you could maybe save some money on the hardware purchase itself when you buy elsewhere. But those immediate savings will cost you more in the long run.
The top benefits of buying hardware from Innovative are:
- Reduced labor rate.
- Access to "save the day" loaner equipment.
- Third-party accountability for purchasing process and opportunity cost of purchasing.
- Ability to piggyback multiple projects and address other needs at once (cost savings and improved efficiency of technology projects).
- White-glove warranty service that maintains data security and privacy.
Reduced Labor Rate
Let's continue using PC replacements as an example hardware project. The average PC setup and installation takes four hours per PC. Innovative's project installation and setup fees are flat-rate. We calculate flat-rate fees based on the anticipated amount of time we expect a project to take multiplied by $175 per estimated hour. However, we discount project labor to $144 per estimated hour when you purchase the hardware from us. And if you're adding or replacing only one PC purchased from us, the setup and installation are included at no cost under your standard managed services contract.
Flat-rate labor fees force accountability on us for completing projects on time, on scope, and on budget. When an IT company charges an hourly labor rate, they're financially incentivized not to meet the timeline – they make more money for more hours. We're on the hook for extra hours in our flat-rate model if we take longer than planned.
Of course, no estimate is perfect, and we do include a contingency on most projects as a buffer for the unexpected. But simple projects, like PC installs, are so predictable for us that we often don't include a contingency at all. And if we do, it's for small things like adaptors for different types of monitors.
Discounted labor rates aren't just incentives for you to buy from us. Increased labor rates are how we recoup the project's risks of taking longer than planned when we don't own the purchasing process from start to finish.
Our purchasing team is well-versed in what hardware does and what we can replace it with if something's not right, delivered incorrectly, or out of stock. When we provide the hardware, all elements of the purchasing process are within our control. We know there will be no day-of surprises. If an item doesn't arrive on time, we know about it before sending a tech on-site. If we receive an incorrect part, we correct it before coming on-site.
Accurate Lifecycle Management Planning and Inventory Management
Your standard managed services contract includes lifecycle planning and inventory management. But the more processes we own, including purchasing, the more accurate our data is and the better proactive planning you'll experience from us.
You hold Innovative accountable for knowing the ins and outs of your entire network. We strive to pro-actively advise on your budget and growth planning, hardware replacement schedules, and security and efficiency best practices. But we can't deliver on those promises like we want to when you don't include us in your purchasing.
We have staff dedicated to maintaining accurate inventory databases and planning for upcoming projects up to five years out. But when you handle some of your purchasing, things are inevitably missed, and opportunities for efficiency go unleveraged. We can't manage equipment we don't know exists, and we can't help with things like secure data destruction when we don't know you replaced a device.
Additionally, we're often able to maximize the use of project labor by piggybacking two projects together. For example, suppose you're planning to roll out two-factor authentication (2FA) next year and have a hardware refresh project next month. In that case, we might recommend implementing those two projects simultaneously.
2FA projects are incredibly labor-intensive due to the time required to touch each device and work with each user. We can often kill two birds with one stone (more like one and a half birds with one stone – but you get the gist) by combining a 2FA project with another project that requires us to touch each device - like a significant workstation refresh project. You could save up to 50% on your 2FA labor down the line by allowing Innovative to handle your purchasing and planning.
Innovative typically purchases the same catalog of hardware models for all our customers. That allows us to keep what we call "save the day" equipment on hand. When something breaks or needs replaced sooner than we can acquire the hardware, odds are we have something that will work in the meantime.
It's not unusual for a customer to use a loaner switch or server for a few days or even weeks when something fails unexpectedly.
When something critical to your network fails, we immediately dedicate resources to the problem. If you bought the hardware from us, odds are we can get a tech on the road with a loaner device to have you back up and running within the hour while we troubleshoot or replace your failed device.
Innovative's hardware comes with at least a one-year warranty on parts and labor. Your quote notes any additional warranty period beyond one year. For example, phone systems have a warranty for the life of your contract period while we warranty servers for the life of your contract with Innovative, typically up to five years.
Hardware purchased elsewhere often comes with a warranty as well. However, Innovative only services warranties at no cost on hardware bought from us. If the hardware is purchased elsewhere, manufacturer warranty assistance on your behalf is billable at $175 per hour and not included under your managed services contract.
We'll troubleshoot your issues under your unlimited service contract. If we determine the problem is warranty-related on hardware purchased elsewhere; it is your responsibility to handle that warranty claim with your retailer. Typically, that involves returning the device to the retailer where you bought it. They'll either repair or replace it, which could take days to weeks, leaving you without a device during that time.
Innovative is also more successful at getting repairs covered under warranty than the average consumer working with a national retailer. Our relationship with vendors gives us leverage to push warranty claims through more than you'd be able to push a large retailer like Best Buy to warranty a repair in the gray area of the official warranty policy. Plus, our technicians talking with vendor technicians can more definitively prove when the failure meets the warranty criteria.
When you return the hardware to a national retailer like Staples, you lose control over the chain of custody of any sensitive data on that device. Suppose the retailer exchanges your warrantied device for a new replacement. In that case, you are still responsible for ensuring appropriate data destruction and absorbing the setup and installation cost of the new device.
When Innovative replaces a device under warranty, those costs and services and any available loaner equipment are included either by your warranty or managed services contract.
Opportunity Cost of the Purchasing Process
When Innovative sources your hardware, we are accountable for the entire purchasing process. From identifying a device that suits your needs to setup, installation, and follow-up with the end-user, we're accountable from start to finish.
One common issue we run into with customer-purchased computers is the operating system. Home operating systems are more prevalent than professional operating systems at consumer retailers like Amazon and Best Buy. If you're not in the business of buying computers every day, it's easy to miss the specifics of which flavor of Windows comes with the computer you're purchasing.
When we show up to install your PCs and discover they came with Windows Home, you'll have an additional cost of $200 for the upgraded windows Pro license, plus a few hundred dollars in labor to upgrade the operating system and integrate it with your domain.
Let's go back to the 20 PC replacement project example and assume you're confident finding PCs with the exact specs you need. It will take an hour or more to search other retailers for those identical PCs and peripherals. That doesn't include the time to receive them, verify the accuracy of the shipment, handle any returns, communicate about shipping delays, and securely house the devices until installation. And that's assuming you don't run into any out-of-stock or back-ordered items, which is incredibly common these days. When that happens, you're looking at another hour or two trying to find a comparable model.
And the more you search, the more likely you are to miss something on the specs. You could buy two seemingly similar computers, but minor differences in the specs could significantly impact the end-user. Things like i5 vs. i7 processors and solid-state vs. hard drives can have a massive impact on whether the machine is suitable for your use case.
For example, compare the specs for this HP EliteDesk 800 G6 Desktop and this one. Do you understand the differences? Do you know what impact they'd have on your user? In some use cases, the end-user could experience very little to no difference between these two machines, while a different user would notice a considerable difference in performance. That level of detail in researching and identifying the proper hardware for your specific situation and future growth is what you get when purchasing hardware from Innovative.
Saving Money on Buying Hardware Will Cost You More Down the Road
If you took nothing else from this article, we want you to know that if Innovative could afford to keep the lights on and give you the same prices on hardware as Best Buy, we would. But that's not possible for a business our size that delivers the level of hands-on service we give to every purchase you make from us.
You might pay us more than Amazon or hp.com for your hardware.
In return for purchasing hardware from Innovative, you get:
- To hold us accountable for buying the right
- To save the opportunity cost of the purchasing process.
- To maximize the investment you've already made in your partnership with Innovative.
- Access to "save the day" loaner equipment when you need it.
- White-glove warranty service that maintains data security and privacy.