Warranty in the IT industry

Your Rs 4 lakh server malfunctions, you go to the manufacturer expecting him to fix it. He turns around and tells you that your warranty clause doesn’t cover the problem your server is facing. What do you do? Do you simply slap a case on the manufacturer, and buy a new server to serve you in the time that the case takes to be resolved? Maybe not. A better way out of such situations is to negotiate the warranty well before buying.

So that you can negotiate better, we’ve answered some questions on warranty that you may have when buying IT products.

What is a warranty?



A warranty is a manufacturer’s promise that given the right inputs and environment, his product will perform certain functions. It details the seller’s obligations and the remedial action the manufacturer will take if the product fails to meet those expectations. A guarantee is more stringent and requires that certain conditions (like a particular temperature or power supply) be maintained for a product to give optimal performance.

What warranty do I get with a branded PC?



A branded PC’s owner swears by the fact that his manufacturer acts as a single window contact point if his machine gives trouble. The branded PC’s maker will rectify all problems with the PC bearing his brand name, irrespective of which component malfunctions.

What is the warranty period in the case of an unbranded PC where a single machine incorporates components manufactured by different companies, who give different warranties for their products?



If an unbranded PC stops working, do you prosecute the various manufacturers or at least the manufacturers of the offending components? What happens to your malfunctioning machine in the meantime? Do you stop working on it and wait for your dispute with the maker to reach a resolution or do seek some other alternative? The answer quite simply is to borrow the best from the branded PC concept–treat your vendor as your single window entity and negotiate a warranty package with him that will bestow on him the responsibility of keeping your PC in a working condition. The idea in these cases is to negotiate for the longest possible warranty period coverage, keeping in mind that the vendor will factor in the increased coverage by way of an adjustment in the price he will ask you to pay for the PC. For you the individual warranty period for every component will lose its relevance since your relationship with the manufacturer will be replaced by that with your vendor, who will take care of your PC-related problems.

The modus operandi of the vendor in such a case is to enter into a back-to-back arrangement with the manufacturers of parts for replacing defective products with functional ones. You don’t have to seek different manufacturers for product support, and your machine will be operational in a much shorter time than if you were to seek the manufacturer.

What about warranty issues with servers? What kind of service agreements must I reach with the vendor to avail maximum value from the machine?



The server industry adds some different issues to those faced by the PC industry. Since a server functions 365 days a year, 24 hours a day, and supports a number of users simultaneously, a malfunctioning server will affect all users it supports.

So you need to find a vendor who has the infrastructure to provide round-the-clock service, and the financial wherewithal to keep with him an inventory of spares, so that he can repair a machine within the shortest time possible. This vendor would also have a team of qualified staff. Since your relationship with the vendor will be a continuous one, you should find a vendor who can service your server for as long as you want to use it.

Once you select the vendor, you have to establish the operational parameters of the relationship. You should do this by supplementing the warranty with what are service-level agreements. Within how much time will a vendor respond to a complaint lodged? How much time does he have thereafter to rectify the problem? What, if any, is the liability of the vendor if a server is not up within the specified time? The service-level agreements address all such issues. The vendor is usually given a fixed period of say about two hours to respond to a call for assistance. He then has, say, a further four hours to have the server up and functional. Beyond this stipulated time, he has to pay damages to you for the delay. The agreement in these cases demarcates certain time periods and the attendant liability the vendor incurs. The agreement will, for example, state that an hour’s delay will mean that the vendor is liable to pay Rs x. It will also specify that a delay of two hours will mean a liability of Rs x+1, etc. The important thing here is to realize that the damages liability of a manufacturer/vendor is meant to prod the manufacturer into getting the server up and functional as soon as possible, and not for its monetary

value.

What are the warranty issues with software, especially customized application software?



Most OSs come with a preset warranty package. Carefully drafted, these radically limit the liability of the manufacturer and there is seldom any scope for redressal, over and above that offered by the manufacturer, even if the product has bugs in it. The situation is different when you purchase application software and have it customized to suit you. Any software performs a certain number of specific functions. You’d have the creator of the software build on the existing platform and add more functions depending on your needs. This addition, in the case of a business for example, may be a one off addition or be spread over a length of time, depending on the changing needs of the business. How do you calculate the warranty period in such cases? Should the warranty cover only the original software as available or is there cover for the subsequent modifications as well? The warranty period in such cases is calculated from a date when all the modifications have been carried out to the satisfaction and as per your requirements. The manufacturer then provides for a period where he undertakes to rectify all bugs that may arise in the functioning of the software.

What must I know when negotiating warranties for peripherals?



Manufacturers/vendors will give a warranty for a product like a printer or a projector. They will, however, not give a warranty for the consumable, like printer ribbon or cartridge in the case of printers and bulb in the case of projectors. This has a ramification when negotiating an AMC (annual maintenance contract) for the peripherals. Imagine the case of a projector that costs, say, Rs 100. At the time of giving a warranty, the vendor agrees to provide maintenance at a cost of 10 percent of the total product cost. At the same time he makes it clear that he will not give a warranty for the consumables. What should be the value of the AMC the vendor agrees to provide? Since the vendor refuses to give a warranty for the consumables, which have to be replaced at your expense, shouldn’t the cost of the consumable be deducted while calculating the cost of providing the AMC? While this may seem like arguing over trifles, the cost of a bulb, for example, is almost 30 percent of the cost of the projector. Deducting the value of the bulb while calculating the AMC value will result in substantial savings to you.

Why should I concern myself with warranty when I can take legal recourse?



This is an industry where the relationship between you and the vendor/manufacturer is highly critical. Just as the manufacturer needs you and your money for his business, you need support for the product, which the manufacturer/vendor can provide. A good working relationship with the vendor will ensure that while the vendor takes up the issue of the defective part with the manufacturer, he is in a position to temporarily replace it with another, allowing you to continue working on your machine in the meanwhile. A court battle against the vendor in this case would result in no such support.

Different software and hardware often influence each other’s performance, like certain software will cause others on the same platform to malfunction. How can liability be then pinned on the manufacturer of a particular item?



The important thing to remember in the case of warranties is that there are no hard and fast rules in the business. The idea is to negotiate, with an idea in mind of how the IT business actually works.