Some companies like to outright own their IT equipment while others prefer leasing. Of course, both approaches have their advantages and drawbacks and the best solution varies from company to company; an upfront lump sum payment might be favorable for one business, while regular leasing payments is the best solution for another. But for businesses who are in the middle of planning their next large-scale IT infrastructure upgrade, leasing may be worth considering.
Therefore, here’s a look at some of the benefits that leasing IT equipment offers over paying up front.
Instead of paying a lump sum up front, your expenses are broken up into regular (usually monthly) expenses. Often times, it’s easier to get the CFO to sign off on a project if it’s divided into neat, predictable payments. CFOs prefer manageable and predictable expenses – they’re easier to plan for, pay for, and to justify. And with Gartner finding that 41% of CFOs are the key decision-makers for their company’s IT expenditures, sometimes getting a proposed IT project approved depends on moving costs to monthly operational ones, instead of asking Finance to find a large amount of capital to finance it.
Upfront capital expenditures are treated differently from monthly operating expenses according to tax laws. Capital investments are deducted as they depreciate over the course of several years, while operational costs can be expensed during the accounting period in which they occurred. So, instead of waiting upwards of five years to benefit fully from the deductible depreciating expenses, leasing provides full expensing benefits on a much more frequent basis.
Staying up to date
With new features and technologies coming out so frequently these days, IT equipment becomes obsolete very quickly. Leasing offers protection against obsolescence – once your lease expires, you can move on to newer, faster, and more reliable servers, desktops, firewalls, etc. Leasing reduces budget restrictions that meant having to remain tethered to archaic systems. And with leases typically lasting three years, that’s just the right amount of time to get good use out of equipment without becoming a laggard.
Leasing your IT equipment can make your business more competitive. Since projects with fewer capital costs are more likely to be green lighted by Finance, your proposed tablet rollout – which promises to make staff more mobile and effective – may have a better shot at coming into fruition through leasing. As well, the competitive benefits of having up-to-date equipment should not be underestimated. Not only do systems work faster and more efficient, but also employees and new recruits want to work on up-to-date technologies. Working on sluggish equipment can have negative impacts on job satisfaction. On the other hand, employees “are invigorated by the chance to work with the latest and greatest technology," says Josh Linton, Vice President of Technology at IT reseller, VLCM. In fact, IT recruiting firm Palo Alto Staffing, lists up-to-date equipment among its top three points that attract candidates.
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