holes in siding

hey guys, just bought an old house and i'm wondering how worried i should be about exposed wood on the exterior. i think it could be a problem, but i don't know how to remedy something like this the correct way.

so far contractors i've talked to have mentioned just matching a piece of the siding and putting it right over; another even said that they would put a piece of metal over it and just paint it a matching color. what do you all think?

thanks!