Data Center Device updates: Leasing servers or buying new?

In recent years, many data centers have stalled on technology updates and have had to run devices that lack support services and may have gone beyond their normal lifecycle. But even if the project budget and technology update cycle are constantly prompting for replacement equipment, IT managers are still under pressure to maximize the benefits of capital spending. When it comes to acquiring new servers, sellers use a variety of financial instruments to find ways to get their new servers into the data center. In this chapter, we compare the advantages and disadvantages of leasing and buying servers, and take this as a basis for exploring viable data center Device Update scenarios.

Buy or lease a server?

Because each data center environment is unique, it is necessary to use the leasing method in accordance with the actual situation of specific analysis. Renting a server has some benefits, but if you're more inclined to buy a new server, you can also look at these ideas and methods to make the process more flexible and concise. When a company decides to rent or buy a server, there are typically two standard reference models:

Standard procurement model

• Purchase of equipment

• Use of equipment

• Disposal Equipment

Standard Leasing Model

• The lessor buys the equipment

• Company's "leased" equipment

• Equipment used by the company

• Company return Equipment

• Rental side Disposal Equipment

Before a company decides to purchase or lease a server, you must know the scope and size of the server update project. Once the IT department has identified the number of equipment needed to be updated, the company can begin to assess the advantages and disadvantages of renting equipment. Leasing is a great way to save costs, as well as some other advantages, we list them as follows:

1, compared with the purchase, one of the biggest advantages of leasing is that the server costs more consistent, easy to manage. Updating a 150,000 dollar hardware environment will cost a lot of it budgets in a short time. Even at a time when economic conditions are allowed, it is hard for policymakers to make easy decisions about this huge spending. If spending happens at a time of economic malaise, let alone. In the recent economic climate, many organizations have tried to limit it spending until the market starts to pick up. If you are facing a tight budget for a long time, it would be a good idea to consider renting a server.

2, rental equipment to ensure that the IT environment and the current technology development trends in line. Fixing damaged old devices usually increases it spending, but leasing servers can keep the technology ahead and ensure the environment is streamlined and productive. Leasing can reduce maintenance costs, and all investments can be directly translated into a drive to improve infrastructure.

3. Through leasing, departments can focus on how to reduce costs. Just pay a reasonable lease fee and don't bother to calculate the budget that will be spent buying the server. However, the rental fee is extended and there are no outdated hardware devices. So when signing a long-term leasing contract, many of the leasing operators will provide some discount.

4. The lease payment can be used for tax deduction. If the IT department does not have a plan to purchase the equipment after the expiration of the lease contract, the rental fee can be used as a tax deduction. The higher the lease fee, the more tax will be saved at the end of the year. The accounting department can provide specific details about such specific business locations.

5, lease size can be adjusted according to the company's growth flexibility. When a business starts to grow or change, the needs of the IT department change accordingly. Leasing services increase the flexibility of the business when it comes to the need to increase the number of devices that can be expanded in the future. For example, a company's call center is ready for expansion. Through the procurement model, the company may need to replace all hardware or at least buy enough equipment to meet the growth of the person. On the other hand, if the leasing method is used, the company only needs to plan, then add or modify the contract, and do not bother to consider how to deal with or dispose of the old equipment.

However, there are also a number of leasing problems that need to be noted when comparing leases to purchases. Remember, if this is a new attempt by the company, leasing contracts and agreements can become very complex.

While leasing has many advantages, it is essential to understand its flaws:

1. Leasing funds may be difficult to obtain. You may not imagine that getting a lease is more difficult than getting a bank loan. Most reputable leasing providers require customers to have a good cooperative credit record. As startups or start-ups, it's also hard to get a lease. Many leasing companies may also require the company to have at least two years of operation qualification.

2. In many cases, leasing is suitable only for certain types of equipment. Most leasing providers also require a minimum lease size of USD 3,000 to USD 5,000. For example, a small company may eventually be unable to lease 3 or 4 workstations economically. They will find it difficult to find reliable providers, and even have difficulty getting better leasing contracts.

3, according to the leased equipment and IT organization planning status, leasing costs in the long run may be relative (purchase equipment) on the high side. Over time, the cost of equipment leasing may exceed the actual purchase price of the equipment. Moreover, the company loses the right to use the equipment when the lease contract is over, and needs to consider whether to renew or return the equipment. Leasing any equipment that requires high maintenance or purchase of expensive accessories may result in additional rental costs. With this in mind-when a leasing contract is drawn up, the company needs to be clear about the use of the equipment. It is changing, so even during the lease contract period, the company may suddenly need to add many of the same type of equipment, may be limited by some conditions. In this regard, the new lease contract and the addition of additional hardware, under the contract, may be much higher than previously anticipated, even more expensive than the purchase.

Whether the equipment leasing is right for your company will depend entirely on future planning and objectives, as well as the overall status of the business. Equipment leasing is suitable for fast-expanding small businesses and companies that are about to be sold. Conversely, for owners with long-term goals, it is more feasible to buy equipment if they want the device to have a long running cycle.

Leasing Server Best Practices and pitfalls

Leasing can become very complex. In assessing the leasing business, there are many elements of the agreement that require careful elaboration. Many organizations may go into many myths when renting equipment for the first time, leading to a reduction or loss of benefits that can be enjoyed by leasing, or even increased spending. The following are some of the pitfalls to be aware of and avoid when renting a server:

Myth # 1: poorly considered rental services

When leasing or procurement decisions are made, some organizations focus on monthly rental costs and do not consider other expenses that may affect the quality of the lease. However, only a full understanding of the full cost of leasing business can be compared with other solutions. For each transaction to be approved, it is important to compare the detailed lease costs and the procurement budget analysis. Also consider the new hardware type and what role it will assume in the environment. Is there a possibility that additional intermediate hardware needs to be added? Is there a good exit plan? When it comes to leasing, cost-driven is one of the important factors that affect the enterprise IT dynamics. Set up specific use purposes for the leased device. That is, if you purchase five new servers for database deployment, you must determine that the project has been fully planned, all relevant costs have been calculated and the exit plan (purchase, sale, transaction, etc.) has been completed after the expiration of the contract.

Myth 2: Do not understand or ignore the terms and conditions of the agreement

The main leasing agreement provided by the leasing company is very important and the mistaken understanding of the leasing obligation may cause unnecessary loss. Generally speaking, most leasing companies will notify the tenant in writing 60 or 90 days prior to the expiry of the lease contract. If a similar function notice is not stated in the contract, it is likely that the lease will be extended automatically in the form of a monthly lease when the lease arrives, or a long-term renewal of the existing contract may occur.

Myth 3: No tracking lease contract and service status

The lessee retains ownership by providing real asset rights. One way to earn a profit is to resell the assets directly to the lessee after the end of the lease term, or to sublet or sell the equipment to a third party organization. For the lessee, the decision to consider whether to renew, terminate the contract or replace the leased equipment will take time to negotiate. The uncertainties of new technologies may affect decision-making, resulting in delays, plus budget constraints that can delay decisions to the next budget cycle. IT managers often forget that the lease is over, or that email notifications have been overlooked. Generally after the expiration of the lease contract will be the default monthly payment of the way, this is a very common problem, may spend a lot of the tenants wronged money. So, remember to check if your lease contract is set to be updated automatically (renewal). Pay attention to your lease status, read and understand the contents of the contract, and be prepared to deal with the expiration of the contract. When the contract is nearly due, decide on how to dispose of the equipment, purchase or other transactions. In this way, unnecessary costs can be avoided.

The benefits of leasing are attractive, and organizations that want to cut spending and improve the management of their computer assets are interested. For some organizations, the potential advantage of saving money is the biggest incentive for them. As long as it is properly managed, leasing can reduce hardware costs by about 10% or more. Nevertheless, IT managers still need to study lease terms and agreements carefully before signing a contract. It is very expensive to terminate the contract during the lease period. Keep in mind that the terms of the contract may be modified during the negotiation of the agreement, so be sure to carefully evaluate and master the company's specific requirements for the leased hardware.

About the author: Bill Kleyman,mba,mism, a fanatical technical expert, has extensive experience in the field of network infrastructure management. Its engineering experience includes the deployment of large virtualized environments and the design and implementation of commercial networks. He is currently the technical director of the World Wide Fittings Company, which has branches in China, Europe and the United States.