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Introducing the Concept of Rental
- The basis of any operating lease is a rental agreement where the renter pays
periodic rentals for the use of assets.
- Rentals are based on the reducing value of the asset throughout the term of
the agreement.
- Ownership rests with the lessor throughout.
- No bargain purchase option or residual commitment is negotiated at the time
of inception of lease.
- Operating leases must meet the criteria specified by prevalent accounting
standards of the country.
Companies benefit by using technology, not owning it
To keep the competitive edge, businesses must continually invest in
technology.
- Often, vast amounts of un-utilized equipment is taking up valuable space at a
high cost to company.
- In today's fast-moving business environment, companies are finding it
increasingly challenging to keep up with an even faster pace of technology
advancements as IT hardware manufacturers and software developers continuously
introduce new and better equipment to make users more productive.
- The useful lifespan of IT equipment has been steadily declining. This is
coupled with continuing drops in acquisition costs because what you pay for
today is worth less tomorrow, never mind in a couple of years time.
These trends clearly indicates that ownership is no longer a viable option
for companys intent on staying current with new technology offerings and for
those who wish to reduce the operating costs of technology.
Businesses want to invest capital on investments that provide a
return
This makes investing in technology counter-intuitive because purchased
technology is expensive. First there's the cash layout on the initial purchase
price of hardware and software, add services, warranty, maintenance, forgotten
contractual terms and conditions, and upgrades. Then at the end of an IT assets
usefulness, there are the costs and overheads associated with removing and
disposing of the obsolete hardware and introducing the new, upgraded system. Add
the cost of downtime, or related issues, when technology expires and
businesses do not upgrade to newer technology, or even, the cost of downtime
during migration. What about shipping and documentation? Another question is how
much income generating business could have been bought for the cash that's being
laid out for equipment?
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The Rental Concept