Leasing has evolved into a tactical tool in the hands of the savvy IT executive to manage technology equipment more efficiently. Below are eight examples of situations where leasing offers a strategic advantage to achieve your operational goals.
1. Limited-Duration Projects
Many industries are project-based and require significant computing resources only for the duration of a project (e.g., advertising, engineering and construction). These projects are often too long to justify an average rental rate and too short to warrant a full purchase of the assets. In such cases, leasing offers the best of both worlds: the flexibility to customize the lease term and the expense to match the project length and required computing capacity.
2. Test and Staging Systems
Short-term leases allow companies to “rent” test and development systems for pilot programs without the need for a long-term investment. Once the pilot concludes, these systems can be used for temporary staging during a staggered migration to a more extensive production system. And at the end of the migration process, the equipment returns to the lessor.
3. Compliant Disposal of Distributed Assets
Disposal of user-level equipment like PCs, laptops, and mobile devices has become an expensive and legally sensitive task. Failing to comply with data privacy laws can have costly consequences. For example, the Federal Trade Commission required one company to pay a fine of more than $100,000 for violating its “disposal rule,” which mandates secure data deletion†. Working with an equipment leasing provider who offers legally certifiable disposal practices can help reduce such risk.
4. Large-Scale Technology Refreshes
Select leasing companies have programs that include “buy up” of older technology as part of a leasing program for new equipment. This arrangement allows IT management to swap old technology and bring in modern technology en masse while minimizing the cost associated with such a large-scale tech transition.
5. Managing Around Yearly Expense Caps
Leasing allows IT managers to acquire the equipment they need without bumping up against traditional budget processes that would otherwise slow an IT project. For example, installing wireless networks in multiple warehouses might require $500,000 when budgetary restrictions limit IT expenses to $250,000 per year. Leasing allows managers to sidestep ROI-delaying rollouts.
6. Emergency Budget Overruns
Forecasts of needed capacity for production and growth can sometimes fall drastically short. When a massive capital project goes over budget, leasing is one of the few ways a company can acquire the remaining assets needed to continue these projects without requiring another sizeable up-front capital investment.
7. Interim Architectures
Tech refresh cycles are not always in sync with what is being produced by the marketplace. Sometimes an “interim architecture” — kept for only 12-18 months — is required to tide users over until new technology can be implemented on a broader basis within the organization. Leasing allows this to be done economically.
8. Chargeback Structures
Some companies require IT to charge back some (or all) of its budget to support business units. This practice encourages disagreements over fair allocation, equipment costs, and more. Leasing end-user assets helps alleviate this scenario. That’s because it’s easier for IT leaders to communicate the lease’s hard costs and associated management markup.
A Changing Landscape
More executives are leasing equipment because of its usefulness beyond traditional financial benefits. In 2017, U.S. companies used lease finance to acquire more than $200 billion of assets‡ and not because it was always cheaper than buying.
Specific features of some leases summarized above may blur or even dispel the cost difference between a lease and a purchase. Regardless, the operational advantages of leasing equipment, more often than not, result in a net gain attractive to any company seeking to bolster its bottom line.
Huntington Technology Finance stands ready to assist you. We can assess financing alternatives and help you put in place the best solution to achieve your organization's goals.
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