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Paying for your technology

It’s a question facing many schools looking to upgrade their ICT. Should you buy or lease your technology? David Maida investigates.

When sourcing ICT equipment for your school, the decision to buy or lease has become as important as what equipment you choose. Not only are there financial implications depending on whether you decide to purchase outright or pay-as-you-go, but also some of the normal rules of acquisition don’t apply where technology is concerned.

For instance, take length of usage. Generally, the longer a product you’ve purchased lasts, then the more value you derive from it. This is not true with ICT because new software usually makes older machines outdated and then they are relegated to some kind of reduced capacity in the school or they are simply stored.

Then there are the students. They can be very hard on technology and most school machines don’t live out their full lifespan. Even the process of everyone in class logging in and out of the computer at the same time takes its toll on the server.

A new lease of life

Five years ago the Ministry of Education was not comfortable with leases. However, that’s no longer the case, according to Chris Stewart, a director at Asnet Technologies, which specialises in video-conferencing equipment.

“Schools don’t get three years amount of money in one hit. They don’t actually have the cash in year one. Leasing becomes the best option in those sorts of areas.”

Stewart says schools should ask themselves some key questions before they make a decision:

  • Does the school have appropriate funding?
  • Does it have cash flow?
  • Is ICT part of the budget?
  • Is the school in an ICT cluster? (You may get a bulk discount if several schools are buying.)

Where ICT funding is incorporated into a school’s operating expenses then it makes sense to lease. Ironically, if it’s not in the budget, and a school can’t meet the purchase price upfront, then leasing is again an option. But if it’s a one-off chunk of cash from, say, a bake sale, then buy.

If schools were disciplined enough to purchase their items in a planned way, then they could purchase rather than lease – but they aren’t, believes Jonathan Beveridge, account manager at finance company Equico.

“You can’t just acquire a machine with an unplanned approach or without thinking through the cost of that machine throughout its lifecycle. ICT is relegated to the wish lists of cake stalls and externally raised funds. But leasing puts ICT expenditure into the budget.”

When buying makes sense

Of course, choosing to buy has its merits. Equipment with long lifespans – such as whiteboards, screens and cameras – can often be safely purchased because they maintain their usefulness over time and a long lease would be costly. Also cabling, network switches and security equipment are generally bought outright as they become a part of the school premises.

“The model argument for leasing doesn’t work for long-term items like whiteboards because the model concept for leasing is about replacement. You plan for replacement,” said Beveridge.

However, you would have to lease if you could not afford to buy.

“The reason for leasing whiteboards is that they are expensive items and most schools don’t have allocations for things like that in their school budget,” he added.

Low-cost items like webcams and minor peripherals – like printers, USB storage devices, wireless keyboards, and mice – are easily purchased because they’re cheap, are less prone to becoming obsolete and have longer lifespans.

“For individual items in the less-than-$500 range it’s just not worth running as a lease,” explained Beveridge. “If it’s a $70 webcam, we’re not going to lease that. That’s just ridiculous. But if a school wanted a webcam for every computer in three labs which turned out to be 90 webcams then that would be different.”

Reasons for leasing

One of the best features of a lease is that it sets up a regular IT structure for refreshing ICT equipment, according to Jason Macdonald.

“Leasing puts you in a schedule. By having a schedule, you tend to stick to it,” said the director of ICT services for Kristin School in Albany.

Macdonald leases all of his desktop PCs and laptops – reliability is a primary reason.

“I can’t reschedule Period One at 8:30. It has to go. It’s live and we need to have the technology ready for the classroom when Period One happens,” he added.

The school could afford to purchase outright its computers if necessary. But computer leases generally include insurance, warranties, service, support and maintenance costs. This means, if something goes wrong, the teachers don’t have to become computer technicians. It also means they don’t have to actively manage the continual purchasing of bits of equipment. It’s replaced on a regular schedule.

“Once the equipment comes in and we’ve configured it, it’s really quite hands-off,” he said. “For us, three years is a good schedule in terms of the refresh of the technology for the applications we’re using.”

But isn’t leasing more expensive?

Yes … and no. Since all leases involve some finance charges, they are generally a little bit more expensive than an outright purchase. The average purchase price for a desktop today is in the $900 to $1,300 range; leasing costs $35 to $40 per month. But leasing might end up cheaper in the long run.

For a start, around 60 per cent of the money schools spend on ICT is spent on making older machines last longer.

“The cost savings from turning over machinery every three years come from the lack of technical support costs,” explained Beveridge.

Then there are savings in teacher downtime and disposal costs, which also make up for it. However, Macdonald adds that you need to have a good relationship with your finance company.

“The key is that you choose your financers well and you look at options in the finance market to make sure that you’re choosing a good partner.”

Techniques and schedules

The service and support on leased machines remains a critical factor. About the only time Macdonald purchases a computer is when it is a one-off item which does not fit into the existing lease structure when all of the other computers are being refreshed.

To minimise service callouts and downtime, he uses a ‘hot-swap’ technique which allows for a spare computer to simply replace a PC which has gone down.

“To try to have a four-hour response time on service and support might be much more expensive than having a next-day business response.”

So, do you buy or lease? Ultimately, it depends on what you’re buying, how much you have to spend, and the deal you can strike with your vendor. For big ticket items like whiteboards or the small stuff like webcams, buying may be the way to go. But when it comes to the number one ICT cost, computers, a lease is often hard to beat.

Copyright G Media Publishing Ltd. 2014. All rights reserved. Privacy

Categories: Article, Issue 1

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