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Should you Sign an AMC?

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PCQ Bureau
New Update

AMCs (Annual Maintenance Contracts) are a legacy of the mainframe days. They used to be a standard part of buying a large machine because the vendor was the only person capable of repairing the computer. Then came the PC and the practice spilled over. Throughout the ‘80s and early ‘90s most buyers shelled out 8 to 12 percent of the machine cost per year towards AMC. Now fewer users are signing AMCs. Now, a large number of machines are going into homes for browsing the Net, e-mail and word processing. This market segment is cost conscious and not worried about downtime. Also, AMCs are increasingly unviable for providing repair services.

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Ten to 15 years ago, an AMC started after the expiry of the warranty period, which was typically a year. The contract normally covered two areas, preventive maintenance and breakdowns. In preventive maintenance, the service provider visited the installation every three or six months to carry out preventive maintenance. In case of breakdowns the vendor would immediately send a technician to diagnose and fix the problem. This covered labor only, and not spare parts. In some cases the vendor also agreed to provide a standby machine till the original was repaired.

At that point such contracts made sense. There was no open market for spare parts and many items such as motherboards were custom manufactured by vendor. The user had no clue about the origin of the parts and no documentation for things like jumper settings. In any case even if the user could diagnose the problem he would still have to turn to the PC manufacturer for spare parts. The PC manufacturer had a lock over both resources–knowledge and spare parts.

The situation could not be more different from what it is today, especially with assembled machines. There is a healthy after market for parts; you can buy virtually any component you want in Nehru Place, Delhi. Information is available freely over the Net and one can often have detailed discussions with components’ manufacturers via e- mail. The user is opting to use these rather than going in for an

AMC.

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Won’t many users lack the time and inclination to repair their PCs themselves? It would make sense to pay a slight premium and get rid of the headaches. Which brings us to the other part of the story–most assemblers and manufacturers are incapable of providing an acceptable level of service. This has a lot to do with two the rapid obsolescence of components and the fact that many components now come in matched pairs.

The obsolescence factor comes into play when components such as the CPU or RAM require replacement. In most cases the only source for a two-year old CPU is the gray market. This leads to delays and/or a lack of faith in the replacement part. If you decide to upgrade the CPU then chances are that your old motherboard will not accept the newer generation CPU. So you end up buying a new motherboard, CPU and RAM. The story does not end here–you might discover that your new generation motherboard will work only with an ATX cabinet. Needless to say, your AMC provider will be virtually powerless in such a situation unless he uses parts of suspicious origin. The only way out for the AMC vendor is to hold huge inventories of every conceivable component and driver, which would make his services prohibitively expensive.

The bottom line is that AMCs are certainly going to become unattractive for many customers.

Gautama Ahuja runs a turnkey software company, AHC Infotek

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