[Back to Leasing]

Lease vs. Buy?
Two Case Studies Give You Factors To Consider

Apart from your personnel, your equipment and infrastructure are your most important and expensive set of assets, and whether you lease or buy them is one of the toughest decisions you'll make as a CIO or IT manager.

With this in mind, we've talked with people who've made the decision before you to get a feel for why they made the decisions they did and how their experience can help you.

Sebaly Shillito + Dyer

When Brian Clayton, information systems group manager at Sebaly Shillito + Dyer, a Dayton, Ohio, law firm, was charged with building the firm's infrastructure, he knew they would lease their machines. "We ended up getting bids from HP, IBM, Dell, and a few other vendors," says Clayton. "But HP won the bid. They offered leasing that was tailored for us."

The result? Clayton and his colleagues at the firm took out a three-year lease on all their equipment. "After three years," says Clayton, "we get a new lease, and my budget's the same throughout all three years. It doesn't spike, whereas if I'd purchased the equipment, I'd have to prepare for those big spikes [at the end of every replacement cycle]."

That level of financial continuity is a plus for Clayton, whose budget in 2004 is the same as it was in 1999. The nature of his lease arrangement with HP frees him from "taking a big hit once every three to four years" and frees him, as well, from having to make a number of changes to his budget each year.

What's more, notes Clayton, his lease arrangement with HP makes his tri-yearly replacement cycle, to many a necessary evil, something of a breeze. "At the end of three years, we simply turn the equipment back in and get the same kind of setup back—it's just a replacement piece. That way we keep up with processor speed, disk storage, memory, and so on. We get to upgrade. This time around our monitors all went to 17-inch screens because those were the standard. Next time around they'll jump to 19 or 21 inches or maybe dual monitors. We're not on the cutting edge, but just a little behind."

Of course, there are drawbacks to leasing, most notably that by signing a lease with a company, especially a large lease like the one Sebaly Shillito + Dyer signed, you're often forced to choose from that company's menu of equipment. "I wanted to buy a SAN solution that wasn't HP," says Clayton, "but I liked dealing with HP's leasing department—the guidance on buyout and dollar buyout and all the packages they have was good. And they were very friendly." But none of this changed the fact that his desired SAN was from Xiotech, his tape library from Spectra Logic, and his software of choice from Veritas. Yet much to his surprise, HP was flexible. "In the end," says Clayton, "we leased them all through HP."

Brandywine School District

But leasing isn't right for everyone. Just ask Pat Bush, director of information systems for the Brandywine School District in northern Delaware. With 19 schools, more than 1,200 administrative and teaching staff, and some 10,500 students to wire up, Brandywine might be the perfect target for leasing, as leasing avoids the enormous cash layout that buying machines entails, especially in an organization funded through local tax dollars.

But even leasing takes upfront dollars. "To get into an initial lease, you need a large amount of cash, larger than what I have available to me to do. It's not that leasing's not available to me, but I don't have the ‘front money' for it," says Bush. His solution? He buys off-lease equipment. (Off-lease equipment has already been leased for a full two, three, or four years and then been turned in.)

"A new PC with software is around $900," says Bush. "But a new off-lease machine is only $265. This gives me the ability to be constantly upgrading to newer machines." What's more, he adds, "I get a 90-day warranty on the units. Most PC failures happen within the first year. But these machines have already gone through their first year. Once a machine has gotten through its typical break-in period, it outlives its typical life span."

Bush employs the same off-lease strategy for his printers. In fact, the vast majority of his printers are off-lease machines. "Instead of spending $1,100 for, say, an HP 4300N, or for new LaserJet 4s or 5s, I'll spend $65 to $75 for the same machines off-lease." He then replaces the rollers and a few other parts, spending, on average, $18 to $20 for the repair kits for each machine, and gets 200,000 pages out of them. (Bush has several HP-certified technicians on staff who can handle all but the hardest of breakdowns when they occur.)

But when it comes to his servers, Bush leaves his off-lease strategy in the dust. "I spare no expense on my architecture," he says. "I simply won't use off-lease servers. Here, everything's bought new."

by David Garrett
© Processor.com, July 9, 2004, Vol. 26, Issue 28

[Back to Leasing]