High tech, low budget: Stay current by leasing
Information technology is often the key that enables local governments to deliver important services with limited funds. However, trying to keep pace with rapid advances in technology while managing finite budgets can be a daunting task. A sound method for acquiring and managing technology assets is required to address this. Leasing has become the foundation for smarter technology-management strategies for an increasing number of local agencies.
Today, new technology quickly becomes old. In the distributed computing environment, the expected useful life of a PC is less than three years, and for notebook computers it can be less than two years. The real value of technology lies in its usefulness: How much and for how long will it help an agency perform optimally?
Leasing allows an agency to cost-effectively acquire and use an asset for the limited period of time in which the asset provides value, without requiring a company to expend capital to buy the equipment and then dispose of it once it is no longer useful. An operating lease offsets the premium price of acquiring state-of-the-art technology. Agencies pay only to use and benefit from the equipment, not to own it.
Agencies often cannot predict at the time of purchase what the useful life of a technology asset will be. Unforeseen advances or delays in technology have been experienced by most IT users. For many, it is also difficult to anticipate technology needs.
Consequently, one of the most important advantages of leasing is flexibility. As conditions change, a lease allows an organization to expand or curtail services and upgrade or trade equipment without major capital investment. As a result, leases help agencies maintain an equipment portfolio at peak productivity levels, even in the face of unanticipated needs.
While a number of financing options exist for IT, leasing can optimize the use of limited public funds. Bond issues make sense for some long-term assets, but they are not the best option for short-term assets like PCs, networking equipment and printers. Operating leases tend to be more practical and are often at the heart of an organization’s technology-management strategy.
Also, increasing debt load to finance short-term IT assets can cost more than a lease and can also exhaust credit lines. Just one major equipment purchase could require a significant portion of an agency’s technology budget, but a lease payment is a regular operating expense that remains constant throughout the useful life of the equipment. As a result, leasing enables agencies to retain capital reserves and debt resources for other needs
As technology advances, agencies seeking to balance the gains technology affords and the costs it incurs will continue to explore options for flexible acquisition and management methods. Leasing currently fits the bill for many local leaders.
This article was written by William Stuckert, assistant vice president of the government marketing division at Comdisco, Rosemont, Ill.