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Gartner Says Companies Must Act Now as Cisco Prepares Maintenance Price Adjustments; Analysts Advise Enterprises to Negotiate Agreements Before July 1 Price Alterations.

Business Editors

STAMFORD, Conn.--(BUSINESS WIRE)--June 24, 2002

Cisco Systems will be adjusting its maintenance pricing fees on some of its products beginning July 1, so companies must review their maintenance strategies immediately to ensure their costs are as low as possible, according to Gartner, Inc. (NYSE: IT and ITB).

There will be price increases of 5 percent to 10 percent for older router product families (4500/4700 and 7500), as well as price increases averaging 20 percent for the newer Content Engine family. Cisco is also lowering some prices. There will be price reductions of 15 percent to 35 percent for its Software Application Support (SAS) and Software Application Support plus Upgrades (SASU) programs, as well as price adjustments for other products.

"We recommend that Cisco customers extend their maintenance contracts to lock in the old rates, assuming that they can still space out payments over the life of the maintenance contract," said Mark Fabbi, vice president and research director for Gartner. "Remember to negotiate maintenance rates before making any new purchases because this is the only time the enterprise has leverage. Since these products will remain on the company's network for a period of time, take advantage of multiyear commitments to increase discount levels."

Gartner also recommends that companies investigate third-party maintenance offerings, but enterprises need to be aware of the risks.

"The enterprise is one step removed from manufacturer support with a third-party offering, so the company loses some control of the problem escalation process," said Lawrence Orans, senior analyst for Gartner. "Nonetheless, third-party maintenance can offer major savings over direct Cisco maintenance programs."

Companies should try to negotiate additional discounts for lightly configured chassis products. If enterprises use standard configurations instead of the most advanced modules, they likely overpay for maintenance and can use this to negotiate a better discount.

Gartner analysts said some companies are probably paying for too much maintenance.

"Not all of the enterprise's network may need the highest level of maintenance. Companies should consider reducing coverage for some locations or products to next-business-day levels," Fabbi said. "Older commodity products, in a stable environment that have a simpler software makeup, such as workgroup switches, may not need maintenance coverage at all. Keeping a couple spares may be a more cost-effective approach."

About Gartner, Inc.

Gartner, Inc. is a research and advisory firm that helps more than 11,000 clients understand technology and drive business growth. Gartner's divisions are Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and has 4,300 associates, including 1,200 research analysts and consultants, in more than 90 locations worldwide. The company achieved fiscal 2001 revenue of $952 million. For more information, visit www.gartner.com.
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Publication:Business Wire
Date:Jun 24, 2002
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