Nov 01 2011

When Leasing Beats Buying

Schools can survive tough economic times by leasing must-have IT equipment.

When Jamason Isenburg was promoted to technology coordinator of Tremont Community Unit School District 702 in March 2011, he knew he had to make some big decisions right away. Given the significant cuts to education budgets throughout the district's home state of Illinois, Isenburg had to think creatively about how to replace the aging computers and networking equipment in the district's three schools. "We had equipment that was at least 7 or 8 years old, and we had to find a way to get the technology we needed without breaking the bank," he explains.

Isenburg first took a hard look at the annual tech budget to determine just how much he could dedicate to infrastructure maintenance and upgrades. He then mapped out the specific technologies he thought the district would need over the next five years and, in consultation with his CDW•G account manager, researched which desktops, notebooks, netbooks and wireless networking solutions he could afford.

When Isenburg weighed both the tangible and intangible costs of buying versus leasing, the decision was clear. He signed a five-year lease for everything that he anticipated Tremont CUSD 702 would need over that period, including 150 Acer Veriton Z410G all-in-one desktops, 100 Acer Aspire One D255 netbooks for mobile carts, 90 HP ProBook 4525s notebooks for the teachers, HP ProCurve wireless networking equipment, and Symantec security software licenses.

Keeping Up

Besides helping IT managers stretch their budgets and eliminating the need to dispose of outdated or surplus equipment, leasing ensures that teachers, students and staff always have access to current technology.

Kay Reinoehl, director of technology for the seven-school East Noble School Corp. in Kendallville, Ind., has leased networking equipment and other hardware at various times over the past 10 years. "We started leasing to keep the momentum going from a private grant that got us started with putting technology in classrooms," she explains.

The district continued to lease to keep up with Indiana's Buddy System Project, a now-discontinued initiative that aimed to put computer equipment in the home of every fourth- and fifth-grader. "But we just kept leasing, because it stretches our budget," Reinoehl says. "With leasing, I can triple or quadruple the effect of what our dollars can get us over a three- or four-year period and get the technology when I need it."

Reinoehl's newest mission is to fulfill the state's one-to-one computing goals. To that end, she has signed two four-year leases. The first provides 2,700 Lenovo ThinkPad Edge 14-inch notebooks to students in grades 5 through 12, along with administrators and teachers. The second provides the networking infrastructure to support wireless in all East Noble schools.

Doing It Right

Here are some tips for establishing a successful arrangement with a leasing company.

1. Test every option you're evaluating before committing to a lease. "We wanted to make sure our IT staff was comfortable with the technology we chose," Tremont CUSD 702's Isenburg says. "The only way to do that is to get a few models you're interested in and try them out."

East Noble School Corp. takes a similar approach. "Typically, we buy one of everything we are considering, and the network staff tests them," Reinoehl says. "They're looking at how the devices are constructed, how durable the cases are and the configurations. Then they put the equipment on our network and see how the devices respond to our network setup, our proxy servers, if they are fast, or if they crash a lot."

2. Think carefully about lease duration. "There are a lot of factors that go into how long a lease you should have," says Christopher Lee, director of technology for the Marple Newtown School District in Newtown Square, Pa. In 2008, the six-school district began leasing 1,900 HP desktop and notebook computers, as well as Sharp multifunction printers. "The amount of money we had and what we could afford affected what type of machine we got," he says.

A lease's optimal duration also depends on how the equipment will be used, Reinoehl says. If the technology will be used for cloud or hosted applications, for example, it doesn't need to be the latest and greatest, and districts can opt for longer leases.

3. Protect your interests. "Always talk to two or three leasing companies and go with the one that gives you the best terms," Reinoehl advises. But, she adds, if you find a good leasing company with whom you've successfully worked in the past, it pays to give that partner a chance to beat other bids.

Marple Newtown's Lee is a big fan of customizing contracts. He likes to write in a nonappropriation clause so that if the district can no longer afford the lease, it won't be held liable and can return the equipment. He also typically adds a clause that makes the financing company responsible for the costs to ship the hardware back at the end of the lease.

4. Consider an extended lease. If you're looking at a lease of more than three years, Lee strongly recommends purchasing an extended warranty. The five-year lease Marple Newtown signed is two years longer than the standard computer warranty. "Even with the additional warranty, it was still a good deal when you consider what a hard drive, video card or motherboard costs," he says. "Without that extended warranty, we would have had to start replacing parts."

5. Scrutinize end-of-lease options. One of two scenarios typically plays out when the lease period on IT equipment comes to an end: The district owns it or returns it to the leasing company, which often resells it. There are many choices within those two options, however, and it pays to spell them out carefully.

Marple Newtown School District has made 37% fewer service calls for hardware-related issues since moving to a leasing model.

In five years, Tremont CUSD 702 will own its leased equipment. Isenburg can return it for cash or a credit toward the next lease, continue using it, or have the leasing company sell it for him. He also negotiated a sales clause specifying that the leasing company must first make the equipment available to residents in the area CUSD 702 serves before selling it to the general population.

East Noble Schools Corp. has an even more unusual arrangement. Because the district's ultimate goal is to provide incoming fifth- and ninth-graders with notebooks that will carry them through the next four years of school, Reinoehl has negotiated a staged agreement. The notebooks distributed to current fifth- and ninth-graders carry a standard four-year lease, whereas the devices reserved for sixth- and 10th-graders are on a three-year lease; those for seventh- and 11th-graders are on a two-year lease; and those for eighth- and 12th-graders are on a one-year lease.

At the end of each lease period, current eighth- and 12th-grade students can purchase their devices for a price set by the leasing company. If they opt out, the district can buy the notebooks at the same price. If the district also passes, the leasing company buys them back.

To Lease or Not to Lease?

Leasing IT equipment is almost always cheaper than buying it outright, but there are other factors to consider.

The pros:

  • Lower upfront costs
  • Flexibility to customize payment terms
  • Ability to bundle the cost of hardware, software and services
  • Predictable monthly payments
  • More effective lifecycle management
  • Fewer maintenance problems (thanks to newer equipment)
  • Ready access to cutting-edge technology
  • Easier disposal of old equipment

The cons:

  • Returned equipment must be in good working order and wiped of data
  • Modifying equipment voids warranties
  • Leaseholders may be tied to the equipment for the duration of the lease, even if their needs change
<p>Nick Burchell</p>

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