Please re-LEASE me!

494

In effect, this is how simple it is to sell a lease: give customers what they want right away and for very little per month.

For a lot of companies, leases are seen as hassle free, as the maintenance and monitoring of the asset is the responsibility of someone else and you get the full use of the item. I bought my used Hyundai with cash, so you can probably see that I am about to rant so much that Jim Cramer may take notes.
If you already do lease or are considering 
leasing hardware for your business, I encourage you to consider three things: look at value versus costs, bring in-house what makes sense, and lease out your weaknesses. I have decided to call on an old friend, Mr. Engelbert Humperdinck, to help make some key points.
Lease me with all your heart

There is no question that leases have their place, and I use them for some hardware needs. But one of the biggest traps to watch for is the convenience of renewal. And it is on that renewal decision point that I challenge you to really consider if your IT equipment is better off being leased or purchased.
Back in the day, my grandmother’s TV came in a wood cabinet, had 13 channels, only seemed to show soap operas, and was an expensive long-term investment. Electronics are now commodities, so does it make sense to use a leasing model, which is traditionally for expensive items, to acquire assets that are now relatively cheap?
Most organizations wouldn’t consider leasing a chair, but isn’t that close to the same price as a computer nowadays? The more expensive the device, the more sense it makes to consider leasing. But even on that point, you should at least consider owning, especially when your team possesses the skills to do the monitoring and maintenance in-house.
From here to eternity

{advertisement} I will use some examples to show what I did, and what you can do for immediate savings.
My office had two leased devices costing over $400 each per month, situated about 20 feet apart, providing the exact same service. After investigating why we had two devices that close to each other, we got the frequent (and frustrating) response: “We have always done it this way.”
A quick analysis allowed us to remove one device (which was easy because its lease had lapsed and we were paying an inflated monthly fee) and to allow the second to easily handle the workload. That was an instant saving of $4,800 a year! The second device still has two years on its lease, but when that’s up, it will be replaced by a purchased asset with an upfront cost of about $9,000 (including warranty), a useful life of at least five years, and ongoing costs of about $1,500 a year. Just by replacing two leased devices with one owned one, we saved $31,500 with no loss of service. With savings like that on just two devices, why is my company not getting me that sleek sports car? Or a trip to Italy? Who am I kidding? I would even take a slice of pizza at this point.
I recently visited a small business that had a leased device with the capacity to easily support 10 times their present staff. I felt bad for them, but it appeared to me that they did not do their upfront homework. Not only does this monster device take up valuable real estate in their very small office, but it will likely cost them $24,000 over five years.
They trusted their sales rep and paid for massive overcapacity. I estimate they could have paid about a quarter of that on a smaller device, which would then be an asset they could always sell later. Knowing their small margins, I could only cringe at the roughly $18,000 I believe they wasted. This company got too much too soon and paid way too much.
Any fax machines in your office? Joe Friday used to want just “the fax” but that may not be the case any longer. Fax machines can cost $600 a year to lease, but if you have a multi-function printer in your office, it can provide faxing and cost you nothing additional. It’s as simple as taking the cable out of the fax machine and plugging it into your printer. If that works and saves you that kind of money, what are the chances of getting me that aforementioned piece of pizza for the advice?
THERE GOES MY EVERYTHING

For any small business with a few pieces of equipment and not flush with cash, leasing can make sense. But as your organization grows, your team may develop the skills to fix some equipment. Why pay a premium for someone else to do it? I knew that things needed to change in my company when the lease service repair guy arrived and my staff had to show him how to fix the particular problem.
Until about two years ago, my organization used leasing even for computers. But after some relatively quick analysis, we determined that we were paying about twice what we would if we bought the devices with the appropriate bulk-volume discounts. Leases can vary, but five years seems to be the standard. Anyone working at home on a five-year-old computer probably recognizes that it feels slower than the Campbell government’s ability to recognize the unpopularity of the HST. If you have an old device, is your staff really working to their full potential if their equipment is slow starting up every morning?
In many offices, the computer is the single-most important piece of equipment, so keeping a slow one because “there is 1.5 years of lease left on it” will probably go over about as well as trying to replace a big blue bridge without a vote.
After the LEASE has gone

Remember to have a documented electronic asset disposal plan. The lease company that took away that expensive old beast may also be packing some of your sensitive information with it. Data is stored on hard drives and you should have a documented agreement with your lease provider to ensure that your data is secured, destroyed, or wiped. Copiers and computers that are returned after the lease is up can be auctioned or resold on Kijiji or Craigslist. Ensure your information is not being sold along with it.
I have been extensively quoting (and misquoting) Engelbert Humperdinck, so I may as well end on that same note. The next time your lease provider shows up with a free coffee cup or calendar along with a five-year renewal option on an aging device, plan for the future and start thinking about your potential savings “After the Leasin’.” Sorry Mr. Humperdinck. Perhaps instead of all the quotes, I should have opted for “a kind of hush.”
Doug Caton is a Victoria IT manager.