Calculating the Benefits of Technology Leasing

by Granville Triumph

Granville-IT-LeasingIn my last post, I explained how even modest technology investments can help boost productivity, and offered three tips for maximizing the value of technology tools. Of course, many small to midsize businesses lack the capital necessary for large technology purchases, even if those investments will benefit the bottom line. That’s why IT leasing often makes good business sense.

Leasing is one of the most powerful financing tools available, enabling organizations to acquire new technology without tying up capital in a depreciating asset. Through leasing, organization can refresh their IT equipment regularly while gaining a fixed monthly budget that simplifies planning. There may also be tax benefits.

Disposing of outdated equipment comes with many legal, environmental and logistical challenges that organizations often underestimate. Many leases include flexible end-of-term options that eliminate these headaches while providing the opportunity upgrade to the latest technology.

It’s important to look at the total cost of ownership (TCO) associated with the equipment when evaluating a leasing program. Remember, the initial purchase price is generally a small fraction of the TCO. Maintenance, support, upgrades and the ultimate disposal of the equipment make up the remainder.

Clearly, the value of technology comes more from its use than its ownership. This is especially true for the equipment with the shortest life spans. A lease program ensures that equipment is covered by a manufacturer’s warranty and may include provisions for maintenance and support. When considering the entire IT lifecycle, the cost of leasing will likely be comparable to that of other financing options.

Given the popularity of IT leasing, many solution providers offer leasing services. A primary benefit of partnering with a solution provider rather than buying direct from a particular vendor is the ability to get best-of-breed equipment. This benefit extends to the leasing transaction.

Solution providers may be able to leverage volume purchasing and vendor relationships to garner special pricing and rebates. Customers who lease all of their equipment through the solution provider may thus be able to negotiate better deals than if they went direct.

More importantly, customers who lease from a solution provider benefit from a relationship with a partner who will keep their business, technology and financial needs in mind. The leasing business is a mature industry with very few differences in basic terms. Thus, the overall business relationship is a key consideration when choosing a leasing provider.

Companies lease IT equipment for different reasons. Smaller firms may be most interested in avoiding major cash outlays. IT managers at larger companies may need to keep equipment purchases out of their quarterly budgets. Either way, leasing helps the finance department by preserving capital and assisting in balance sheet management. It helps the IT department in standardizing platforms, planning regular equipment rotations and speeding new deployments.

It’s a very simple equation. High tech plus creative financing equals a real win-win.

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