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Plugged In
April 6, 1998
Is computer leasing the right answer?
By Bob O'Donnell
Keeping an arsenal of desktop and notebook PCs up-to-date has perplexed businesses
large and small for years. Thanks to Moore's Law and many other market forces -- not to
mention the ever-increasing appetite of today's applications and operating systems --
computers are facing obsolescence at an annoyingly frequent rate.
IT departments trying to manage their technological assets are constantly having to buy
new machines to replace outdated hardware. Of course they're fighting a losing battle,
because they can never keep up with the rate of change in this industry. Factor in the
number of desktops that now have computers, and you've got migraine No. 9. Even worse,
although accounting rules may allow you to depreciate capital items such as computers over
a period of five years, most IT professionals will tell you that a computer's usefulness
often reaches zero well before its paper value says so.
The challenge, then, is to find a more cost-effective way to keep up-to-date hardware in
the hands of a company's users. The recent moves toward lower-priced systems certainly
helps in this regard, but they don't address the problems associated with storing or
disposing of older equipment that's being replaced. Studies by the Gartner Group and other
organizations suggest that companies can spend as much as $500 or more in total
administrative and other costs just to get rid of an old machine. Think about that for a
second -- disposing of an old system can cost about one-third to one-half the cost of a
brand-new system.
One possible answer to this problem is computer leasing. Leasing isn't a new idea, of
course, even in the computer business. Several companies, such as Hewlett-Packard and
Xerox have been offering leasing arrangements for some time, and more recently true PC
firms such as Dell have offered leasing arrangements. I'm starting to think that leasing
makes a lot of sense for companies (both large and small) all the time.
In fact, in many ways, the idea is so good and so simple, I have to wonder why everyone
isn't doing it. Instead of having to manage the physical assets, worrying about
depreciation and then dealing with off-loading, storing or otherwise caring for old
equipment, companies can simply replace their computer inventory every two to three years,
send the old equipment back and get whatever happens to be the latest, greatest PCs at
that time. Talk about an easy way to ensure that your systems stay up-to-date!
The trade-off for this convenience, of course, is cost. Lease payments are always higher
than the total cost of buying a machine -- just as with leasing a car vs. buying one. But
as computers get harder and harder to truly update, and technology advancements occur at a
quicker rate, I'm starting to think there's still real value to be had in the ongoing
lease model.
© Copyright 1998, by InfoWorld Publishing Corp., a
subsidiary of IDG Communications, Inc. Reprinted from InfoWorld,
155 Bovet Road, San Mateo, CA 94402. Further reproduction is prohibited.
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