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Another solution to “IT as a service”

Often one of the key drivers for outsourcing IT services and data centre infrastructure is a desire to keep working capital in a business. Although costs over three, and certainly six years, are higher when outsourcing, the attraction of keeping “money in the bank” to help with growth or unforeseen difficulties often makes sense. However there is another option for organizations to consider.

British businesses spend £1.1 billion a year on IT Leasing and Financing, says The Finance and Leasing Association (FLA).

95% of the top FTSE 100 companies use leasing to pay for the vast majority of their equipment and software according to a leading IT Finance provider. Yet, overall we spent £12 billion on IT and communications equipment in 2011. This indicates that less than 10% of total spend on IT is currently being funded through leasing. This may change over the coming years as there are some compelling strategic and financial reasons to opt for leasing finance products.

Leasing is a route to consider, especially now that High Street Banks are failing SMEs. Last year they fell short of their Merlin Agreement lending targets by £1billion.

So, why don’t more SMEs use leasing to buy their data centre infrastructure, IT equipment and software?

The answer, we suspect, is that data centre infrastructure and IT leasing is a bit of a mystery, and organizations would certainly consider it, if they knew more.

So here are five reasons to consider IT leasing to fund your infrastructure, computer hardware, software, upgrades, installation and even training.

– There are significant tax breaks. For example, if you pay £1000 a month over 36 months for equipment, the gross cost is £36,000. However, there’s corporation tax relief of 22% every month, yielding a saving of £8,000, so the net payment is £28,000.

– A key advantage of leasing and not buying IT infrastructure, hard and software is cash management and keeping funds available. This can be used as working capital instead of disappearing in an up-front payment all in one go. It immediately gives you greater flexibility in the use of your funds.

– Leasing enables you to upgrade your equipment without having to buy the latest kit, and credit is available on reasonable terms, while banks’ rates can be punitive, if they’ll lend at all.

– Leasing ‘bundles’ (package deals) also cover installation, training and software upgrades.

– Leasing companies have their own Ombudsman and Ethical Code, overseen by the FLA to ensure fairness and integrity.

Perhaps it’s time to start viewing IT as a utility, to be paid for in a way which benefits you without tying up your finances – in a way that frees up capital to develop and grow your business. Company vehicles have been financed in this way for many years, and although a totally different product they can be looked at in a very similar way. Every day you are using the product or service you pay for the product or service.

By leasing your data centre infrastructure, in part or as a whole, your organization can benefit from lower total life costs, greater control and flexibility, while keeping capital freed up for the business to adapt and grow.

If you’d like to learn more about leasing and whether it can make your next infrastructure investment easier, more flexible and cost effective contact