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Finding service: Manufacturer vs. third party
ATM deployers are facing an increasingly complicated decision when it comes to servicing and maintaining their ATMs. Should they sign with the manufacturer or a third party? And in reality, how many choices do some deployers, such as FIs, really have?
August 7, 2005
At the end of the day, ATM deployers have one goal: keeping their ATMs up and running. But figuring out how best to do that can be complicated.
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When it comes to service, deployers have a basic choice to make - to sign with a third-party service and maintenance provider or the ATM manufacturer they purchased their ATMs from. Both have their advantages. Third-party providers highlight their knowledge of numerous ATM makes and models as well as their ability to quickly and affordably respond to problems. Manufacturers say their techs know the software and hardware better and can prevent most problems, which ultimately leads to long-term savings.
But with recent policy changes at Dayton, Ohio-based NCR Corp. and North Canton, Ohio-based Diebold Inc. - two of the largest ATM manufacturers in the world - the landscape for service has shifted.
Arguing that they need to protect their substantial investments in technology aimed at providing customers with better, proactive service, both NCR and Diebold have implemented new policies aimed at restricting access to certain tools and proprietary software that aid technicians in servicing their newer ATM models.
Although NCR does work with "partner" service companies and licensed third-party providers, Brad Luckhaupt, director of NCR's worldwide service marketing for the self-service division, said only customers that have service agreements directly with NCR will have access to NCR's full range of technology and data. And Diebold, which has a similar policy in place, is now the subject of an anti-trust complaint filed by the Albuquerque, N.M.-based Financial & Security Products Association, a trade group with several third-party maintenance-provider members. (Read also,BREAKING: FSPA files for preliminary injunction, FSPA seeks preliminary injunction against Diebold and FSPA moves forward with motion for preliminary injunction against Diebold.)
FSPA claims that because Diebold does not offer partnership or direct-licensing opportunities for third-party providers, it is violating federal laws protecting competition.
In a ruling filed July 8, however, the U.S. District Court for the Northern District of California disagreed. The court denied FSPA's motion for a preliminary injunction that would prevent Diebold from implementing its new policies. In fact, the court found that FSPA's case was not likely to prevail and that Diebold's enforcement of its patents and copyrights on diagnostic software and manuals was in the public interest. (Read also, Update: Court denies motion for injunction against Diebold.)
Rick Moore, the manager of services marketing and sales support for Diebold, said Diebold appreciates third-party maintenance and has no interest in limiting its customers' choices. The way Moore sees it, Diebold also is a third-party provider, since it services other companies' machines.
"We always do what we think is best for the customer," Moore said, adding that the company's marketing materials lay out the choices customers have for service. "We're not No. 1 by taking away customer options; we're No. 1 because we offer the best service to our customers."
Mike Weikert, director of sales and engineering at ATM Components & Technology, a Springboro, Ohio-based company that supplies parts to third-party providers, said Diebold and NCR understand third-party vendors because of the widespread bank mergers of the 1990s, when both manufacturers were forced to begin servicing competitors' machines.
Frank Tambunga, who oversees ATM operation for Texas-based Ozona National Bank, said his FI has experience with service from both a manufacturer and third-party provider. While Ozona has contracted with third-party providers in the past, the bank now gets service through Diebold for its three ATMs.
"We had to get upgrades for Triple DES and Diebold came to us and said they could do it for cheaper, so after that we just stuck with them," he said. "We originally went with Diebold, but at some point, because of cost, we switched to third-party vendors and we weren't really happy with any of the ones we used. Because Diebold made the machines, we thought it would make sense to have them work on them."
(Attempts to reach a financial institution that contracts with a third-party provider were unsuccessful.)
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It all comes down to cost
The bottom line, however, for most FIs when it comes to service is cost.
"The primary reason someone would want to go with a third-party provider is cost, everyone wants to save money," said Woody Alderman, president of Atlanta Computer Group Inc., an Alpharetta, Ga.-based third-party service provider, adding that he estimates independent service costs roughly 15 percent to 20 percent less than OEMs.
Manufacturers counter cost-comparisons by noting that the money they have invested in research and development leads to proactive maintenance that reduces downtime and provides longer-term cost savings. "Our motto is, 'They can compete on price, but at what cost?'" Moore said.
NCR, for example, offers its service customers what it calls a "high-availability service system." Company officials say the system leverages its data collection and proprietary software to better diagnose problems before techs are even sent out, thereby streamlining the repair process.
"We have saved our customers thousands of hours of uptime," said Luckhaupt. "Using the power of our information, integrated systems and processes, we can sit down with our customers to talk about how we can change the way we service their ATM."
Decreased or healthy competition?
While both NCR and Diebold claim their servicing policies do not preclude third-party maintenance providers from working on their machines, third-party providers disagree. Third-party providers say the policies have made it difficult for them to do their jobs. "By restricting the use of diagnostic software, it is a threat to the third-party industry," Alderman said. "The cost for third-party maintenance may go way up."
- Rick Moore, |
Really, the customer doesn't really care about how we've improved our call-management systems, per se ... The customer really only cares about how your service is meeting and exceeding their maintenance expectations.
But Moore said the difference between manufacturers and third-parties is not just proprietary software - it's service quality. "We've made a large investment in documentation and training of our technicians and those are two critical 'tools' that are not software," he said. "In terms of the resources we put into those things, those are areas where a third-party will never be as effective as an OEM can be."
Beyond all the claims, Alderman said, the policy moves Diebold and NCR are making will ultimately adversely affect everyone in the ATM industry. "A lot of people don't recognize the benefit to the industry to support third-party maintenance," he said. "There are a lot of manufacturers in the business that need third-party maintenance because they don't have the national presence to support their own maintenance program. And the more people you have in business, the more competition you are going to have, and that is going to drive down prices."
Kevin Bienemann, the director of global services for Long Beach, Miss.-based Triton Systems of Deleware Inc., said his company is one that relies on third-party providers.
Allowing customers to choose their own service providers has allowed Triton to increase its presence among FIs, he said.
"We have definitely seen sales driven by buyers who select Triton because they can select their service organization rather than being tied in to the manufacturer," Bienemann said. "We have no problem providing (third-party providers) with technical expertise and tools to service our machines in the field. We feel it is a competitive advantage because the enduser has the ability to decide what service they want, and that creates appeal for our products."
Bienemann said the competition provided by third-party providers is important to his company. "Our strategic approach is that the total cost of ownership is very important. Independent service organizations create competition, and that drives down service costs."
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Another consideration is finding a service provider that can address a wide variety of concerns. "Banks like to call one service company to service everything," said Jerry Brown, who handles marketing for ATM Components. "Third-party maintenance providers will often service vaults and everything in the bank. Third parties have a much broader coverage of everything in the bank, not just the ATM, and that is something OEMs cannot argue with."
In the end, Moore said, the primary concern is whether the provider is getting the job done. "Really, the customer doesn't really care about how we've improved our call-management systems, per se," he said. "The customer really only cares about how your service is meeting and exceeding their maintenance expectations."
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