Today's guest post is from my buddy Nate. He has the mind and personality to get down and dirty with a businesses books. He loves numbers and making sense of them. Which is why he founded "Small Business Decisions" so that he could help businesses be profitable for a living.
The decision to Lease or Buy your computing hardware is something that comes to many businesses as they grow. Your first few computers were most likely purchased as they were needed. But as you grow, it's worth considering if you should switch from buying to leasing your computer hardware.
The finances of a lease vs buy decision for computer hardware are easy to measure, but that doesn't mean those equations should be driving the decision. The decision-making power of your team and employees should be focused first and foremost on the things that differentiate your company from the competition.
Yes, Computer Hardware is critical to business deliverables, but it is rarely a differentiator for your business. Critical but non-differentiating tasks are prime candidates for contracting out to an expert. The most common method of contracting out the supply of computing hardware is leasing.
What differentiates you from your competition? Why do people choose you over the guy down the street? If the thing that makes you different is your computing hardware, then you need to maintain tight control of that critical differentiator. For example, if you're Google or Amazon Web Services, your computing hardware most certainly is a differentiator. But they are an exception, not the rule. More than 90% of businesses do not gain a real differential advantage from what computing hardware is crunching the numbers. Which means that many businesses would benefit from spending less time worrying about it and letting an expert supplier work that angle for them.
If Computing Hardware does differentiate you from your competition, then you can either closely partner with a key supplier to deliver your differentiation, or you can bring the whole thing in-house. The reality is that you are an exception to the rule, so you might need a detailed discussion with someone like Solve or SmallBusinessDecisions to make sure you are fully supported in your critical tasks.
The timing of when you get new computers plays into whether or not you lease or buy your computers. I like charts and graphs, so here's a chart that lays out the four options we're talking about. The most common pathway through these quadrants is for small businesses to move from the top left, Buy Machines as Needed, to the bottom right, Lease With a Comprehensive Strategy. Often times, leasing is the factor that enables a business to move from replacing machines as needed to having a comprehensive replacement strategy.
Table 1. Lease vs Buy interaction options with the timing of machine replacement.
A comprehensive computing strategy means you spec between two and five machines and every employee in the company gets one of those options. The machines you're using is usually updated all at once on a three or four-year rotation. This type of plan is usually paid for with a lease so that you don't have a reoccurring capital expense every 3 years that you need to fund. With a lease, you pay for the machines over a 3 year period.
The focus here is on uptime for your employees, not commoditized computer hardware. You don't want your $100k a year employee to be unproductive for two days while the part for their specific machine is overnighted in from who knows where. The IT department also has the advantage of knowing the ins and outs of a small subset of machines and limiting the replacement part inventory they need to keep on hand in case of a needed repair.
If you are planning to move to a comprehensive strategy, then leasing makes a lot of sense. If you are taking a buy as you go approach with no standardized hardware, that is OK, but it means that the purchase vs lease of one single machine at a time becomes a much different tradeoff discussion.
Regardless of which strategy you choose, the tradeoffs for lease vs buy look like the following:
Table 2. Lease vs Buy Pros and Cons for relative to a comprehensive computing strategy.
Now that we've discussed a few ideas about how to manage your computing strategy. We should talk about what Solve offers. Solve will handle all sides of your computing hardware strategy. From managing the computing power you already own, to helping you spec and buy new machines. And from setting up a comprehensive computing strategy lease to helping you lease smaller portions of your computing power as needed.
For any questions or discussions about your overall computing strategy, please reply to this email or contact Tim directly. If you have any questions about other business strategy and support needs, please feel free to reach out to Nate directly on www.smallbusinessdecisions.com or by email: Nate@SmallBusinessDecisions.com
Tim Dixon is the owner of Solve IT Security.