feature Leasing IT equipment
IS more cost-efficient In a recent White Paper sponsored by Dell Inc. IDC experts Joseph C. Pucciarelli and Jennifer Koppy concluded that systematic and timely renewal of servers, such as you get with a leasing solution, results in lower total cost
I
DC took their starting point as the current economic situation that has led to virtually every industry segment, facing major new challenges. For CEOs and their leadership teams, coping with these massive business model challenges has translated into an unprecedented need for innovation at every level of the organization. For IT professionals, this situation has created a problem. On one hand, the need for business innovation directly translates into expanded IT requirements. At the same time, it creates massive demands for capital from other functions within the organization, so IT is being challenged to largely fund these initiatives with internal IT budget savings.
So, the objective is as crystal clear as it is simple: how can IT capacity be added in the most cost-efficient manner? Is it more cost efficient to buy x86 servers and storage, and run them until failure (i.e., 5 years or more), or is it more cost efficient to systematically replace equipment every three years, taking advantage of next generation silicon technology, embedded systems management and configuration tools; and lower acquisition cost? IDC research found that systematically replacing x86 servers and related network storage arrays every 3 years, often by leasing and then returning equipment, is at least 25.4 percent less expensive, compared with equipment (typically owned) that has been installed and operated for 6 years. The principal driver of these cost differences is not the fact that new systems are faster or have more capacity. The principal cost driver is that once year 4 is reached, the support requirements for x86 servers and network storage arrays increase substantially. The (much) higher cost of support radically raises operating expenses – even without applying any value to the increased downtime associated with older systems.
Support costs are key
What are these support costs? In IDC’s experience, few IT organizations analyze platform support costs by year of acquisition, and IDC found in its survey of IT organizations that support costs vary significantly by year. The financial accounting practices at most large companies are similar and share key limitations. In these organizations, for example, imagine a company whose fiscal year ends at the end of a calendar year. For this company, all equipment acquired during the year is typically accumulated until the beginning of the next year. At that time, the depreciation cycle is started, and for this type of x86 industry standard server hardware and storage, such as Dell's PowerEdge server family and PowerVault storage family of equipment, most companies use a four-year depreciation schedule. Assuming the
24
equipment was bought over the course of the year, it is already, on average, six months old when the depreciation cycle starts. And, because companies do not typically replace equipment right at the beginning of the calendar year, the equipment is usually closer to five years old by the time it is replaced – assuming the IT organization in question has a well-structured renewal strategy. With these practices, and it understandable how equipment often reaches five or six years old before renewal.
Another complexity is depreciation For IT organizations that seek to manage their equipment on a life
CONTRAST OF X86 INDUSTRY STANDARD SERVER OPERATING MODELS
Message in the data: A two-Processor, x86 server managed on a three-year systematic replacement cycle costs only 74.6% compared with servers managed on a Buy Once/Fix Forever operating model. Notes: Data is based on a two-processor x86 server, with 200 users per server. Buy Once/Fix Forever Model is based on one server, deployed for six years, and owned. Acquire/Run/Renew Model is based on two servers, each deployed for three years, and leased. Source: IDC, 2010
www.leasingworld.co.uk ■ March 2011
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52