[ale] Compaq Reliant web server

[Leonard Thornton]

Don't misinterpret my comments to think that I am in favor of what I have 
outlined.  I merely display it as the reasoning as to why the bean counters 
and IT managers do it that way.  You have to remember also that these 
managers have departmental budget guidelines to live within and usually 
must get special approval for capital expenditures, whereas leasing does 
not always require those approvals.  Consequently, leasin gives the 
managers a way to get more for their budget dollar without having to go 
through the 6 month approval process and justifying ROI to the corporate 
types above.

I don't agree with it, but thanks to our convoluted tax code and 
depreciation rules, as well as corporate "show me a return in 1 quarter or 
you can't have it" attitude, this is the way business is going to be until 
something changes.  Add to this certain vendor's plans for "software by 
subscription" and the ensuing mandatory upgrade cycles (with the associated 
larger hardware requirements) and I see no light at the end of the tunnel.

What this does is present small developers the opportunity to pick up used 
equipment of relatively current vintage at a bargain price, allowing us to 
be far more competitive than the big boys who are locked in the viscous 
cycle.  While I may not have a Pentium IV 1.4Ghz to work on, my $300 AMD 
Athlon 800 system is plenty adequate to develop product on to compete in 
the marketplace.


At 04:18 PM 7/12/2001 -0400, Jeff Hubbs wrote:
>Leonard -
>
>What happens when you look at the bottom line - INCLUDING the taxes?  Do I
>really want to pay more in lease costs than I would in purchase costs just
>for the privilege of lowering my taxes by only part of the difference??
>
>And, what if my requirement does not grow at anywhere near the same rate as
>the power of the computers that become available to me for the same lease
>cost?  Do I want to go through all of the integration work and changover
>logistics just to get computers that are roughly four times as powerful (in
>an crude, abstract sense) to run my requirement, especially if my
>requirement stays level?  And what becomes of the computers that come off
>lease?  Why, they're sold by the lessor for one last pulse of revenue.
>
>Sounds to me like the only beneficiaries are the lessors/manufacturers, and
>the politicians they buy.  The rest of us try to run on a treadmill and
>often aren't allowed to get off or at least choose our timing.
>
>My approach is to keep machines semi-disposable and cheap where possible,
>use Open Source software, and use what other people consider junk where
>possible.  I'm not the kind of person who thinks the letters D-E-L-L are
>worth an extra $1000-2000 per system.
>
>These lease plans erode our liberty, encourage overspecification, produce
>excess waste, hamper our effectiveness as IT managers, promote a derelict
>taxation system - and no one has convinced me that an organization helps its
>bottom line through there use in perpetuity.
>
>Yes, there is a place in this world for leases.  If I'm assembling a project
>team that will only exist for a year, I'd seriously consider leasing their
>desktop PCs even if it cost me a little bit more to do so.   Same if I've
>got a six-month development project that involves RS/6000.
>
>To change the off-topic subject a bit, part of my motivation is to minimize
>my contribution to the staggering piles of junked computers that we are
>creating, with their toxic metals, etc.
>
>- Jeff
>
>-----Original Message-----
>From: Leonard Thornton [mailto:Leonard at Intelis-inc.net]
>Sent: Thursday, July 12, 2001 2:33 PM
>To: Dan Mount; Bao C. Ha; ale at ale.org
>Subject: RE: [ale] Compaq Reliant web server
>
>
>It is far more cost efficient, both from a tax standpoint and a technology
>standpoint to lease as opposed to buying.  If you purchase computers, you
>are forced into depreciation schedules for tax purposes which far exceed
>the usable life of the computer equipment and imposes significant costs to
>replace the equipment early.  Additionally, the capital cost associated
>becomes a taxable asset used in determining the value of the company and
>subsequent taxable  value at the end of the year.  Leasing allows you to
>obtain the best equipment for a more flexible time period AND you get to
>use the expense of the lease as a write off against income at the end of
>the year.
>
>At 02:02 PM 7/12/2001 -0400, Dan Mount wrote:
> >-----Original Message-----
> >From: Bao C. Ha [mailto:baoha at sensoria.com]
> >Sent: Thursday, July 12, 2001 1:22 PM
> >To: ale at ale.org
> >Subject: RE: [ale] Compaq Reliant web server
> >
> ><snip>
> >
> >All of the computers are replaced by leased ones.  The
> >3 year-leases cost more than just to buy the computers
> >outright.
> >
> >Unfortunately, your tax-payer money is paying for these
> >mis-management mistakes, which actually showed up as
> >progresses.  This was an IT department which rebooted
> >Unix servers at least once a week to fix a memory leak
> >problem.
> >
> ></snip>
> >
> >I'm not an accountant (bean counters feel free to elaborate/correct me),
> >I'm not sure of specific numbers, but here is how I understand the lease
> >versus purchase decision.
> >
> >Would you rather come up with all of that cash out of pocket, or pay for
> >it over time? A company buying large amounts of equipment would run out
> >of cash trying to buy all of the equipment that it might need. If you
> >lease, you just start making monthly payments. Also leasing gives the
> >company opportunities to write off the cost of the equipment in the time
> >of the lease. At the end of the lease the company would probably replace
> >the equipment anyway. Why not finance? Well, in certain cases it might
> >be attractive, but leasing generally gives the company more cash in hand
> >and a quicker 'depreciation' versus purchase. Go talk to your bean
> >counter about capitol expenditures versus leasing and he/she can give
> >you more insight to the tax/financial implications that each brings.
> >
> >DM
> >
> >--
> >To unsubscribe: mail majordomo at ale.org with "unsubscribe ale" in message
> >body.
>
>The difficult while you wait.....the impossible overnight.
>
>Leonard Thornton
>Intelis, Inc.
>5960 Crooked Creek Rd
>Suite 30
>Norcross, GA  30092
>
>Office: 770.825.0032
>Fax:            770.825.0028
>Cellular:       404.583.5402
>Pager:          888.785.9188
>Email:          Leonard at Intelis-Inc.net
>
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The difficult while you wait.....the impossible overnight.

Leonard Thornton
Intelis, Inc.
5960 Crooked Creek Rd
Suite 30
Norcross, GA  30092

Office: 770.825.0032
Fax:            770.825.0028
Cellular:       404.583.5402
Pager:          888.785.9188
Email:          Leonard at Intelis-Inc.net

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