Technology obsolescence has been the key driver in determining whether the new IT Hardware and Software you want to procure should be either purchased outright or leased.
Not only IT Hardware but also furniture, fixtures, air conditioning, lightning, flooring etc can be clubbed into the bill of material in case you prefer a complete off balance sheet treatment for your IT Infrastructure.
The reasons of the growing popularity of leasing IT infrastructure were –
- Lease rentals are accounted as expense in the P&L account and hence help reduce the tax liabilities to some extent.
- Increases your borrowing capabilities as you need not spend from your cash funds thereby improving your credit rating.
- Use of capital for alternate investments either in assets which are critical for the business or are either appreciating in value or less prone to obsolescence.
Today however there is the option of adopting cloud computing services which claims to offer more substantial benefits.
While many argue of the financial benefits of moving from an on premise IT Infrastructure to a cloud service provider, there are others who say that the same can be replicated with having a customised structured leasing agreement with the Leasing Co.
Leasing companies however are more than keen to work with cloud service providers whose revenue model is a perfect match to their risk underwriting criteria.
So now you have a situation where leasing companies are offering tons of hardware and associated infrastructure to cloud computing service providers who in turn are offering cloud computing services to their customers, the subscription revenues from end customers are securitised against the rentals due from the cloud service providers . All this fits in very well to the stake holders in the chain.
In conclusion customers today have multiple options to optimise their infrastructure investments and look at capital procurement for key business linked assets, they can choose to lease client computing devices and settle for cloud services for their non production based applications.