Server Buying Options: When To Lease Vs When To Buy
Any IT business cannot be imagined without the use of servers. Servers are an essential part of all businesses, whether startups, small or midsize companies, or large enterprises. Any organization that has more than three or four employees does need a server. While handling the multiple devices – desktops, laptops, phones, etc. used by your company, there are chances of getting unorganized. Security of all the devices is of prime importance. You need to manage the logins of your staff and execute password policies. Having a server system is a great way to keep everything organized and under control. Servers serve various roles in any IT network structure and perform many vital tasks. Servers are used for file sharing and security, print services, backups, hosting applications, and many more important functions.
They offer many advantages for businesses of all kinds and sizes – reliability, scalability, improved collaboration, seamless email and remote connectivity, fast expansion, and centralized and automated backup provisions, among many. Servers need regular monitoring and maintenance of the equipment for enhanced and profitable performance. An important question that arises when you decide to get a server is whether to lease or buy the server. Both options are driven by different factors and have pros and cons of their own.
What is Server Leasing?
Server leasing is a process that allows a contract between the provider of the server, the lessor and the user of the server, the lessee. This contract offers the lessee the right to use the server for a specified duration against mutually agreed recurrent payments for a particular period, known as the lease rentals. After the lease period concludes, the lessor takes back the server. Or, the server owner can provide an extension of the lease agreement if the user needs to continue using the server.
When Is The Right Time To Take The Servers On Rent?
Certain considerations have to be made before you decide on leasing servers for your business. Cost is the major factor that guides your decision. Business growth and your team’s technical skills are other important factors. Leased servers offer scalability in architecture and flexibility in management. Unmanaged leased server setup keeps the administrative and management privileges with you. You may need to work more, but you have complete control over the server. It is easy on your IT budget, and at the same time, you get reliable and high performing servers for your business. You can use the funds to improve and grow your business instead of bearing the maintenance costs.
Who Should Prefer Leasing Rather Than Buying?
You can go for leasing a server rather than buying if:
- You have a startup or small business that you just ventured in, and the cost is a significant factor. Leasing a server is cost-effective for you as it does not require you to make a sizeable upfront investment.
- You need an in-house server for the development of new utilities and applications.
- You do not want a third party to handle the security of your server and data.
- You do not want to use the server for a long time; you want to switch to newer models and the latest technologies when required.
What Are The Benefits Associated With Leasing?
- Easy To Upgrade To Latest Model And Configuration
New technologies are released and updated constantly in today’s world. You would not want to invest in a technology that will soon be outdated and become useless for you. Leasing allows you to keep your equipment up to date and to the purpose. You can easily upgrade to the latest model and configuration of your server when your lease is over, without any loss.
- Avoid Huge Upfront Investment
When you lease a server, you are saved from making any huge upfront investment needed to buy a server. Your decision to lease servers instead of buying keeps your company’s cash and liquidity position intact and your overall in line.
- Quick Returns For Short Term Projects
If your company undertakes short term projects often, leasing the server is a viable option for you. Such temporary projects have a defined scope and mostly complete within the stipulated time. Their successful completion fetches you quick returns with leasing.
- Affordable Options For Testing The Applications
Testing applications is an important step to identify any errors or bugs in them before they are released for practical use. Most of the applications undergo user acceptance and end-to-end testing, and it can take up to a few weeks to complete all the phases of testing. Buying a server for app testing projects adds to the cost burden unnecessarily.
- Predictable Monthly Expenses
A lease contract gives you full access to the leased server for a fee until it expires. You pay that predetermined fee every month, hence your upfront cost is much lower than what it would be if you bought the server. The predictable monthly expenses help you to maintain your budget effectively.
- Save IT Hardware Depreciation Costs
An important aspect of a lease agreement is detachment of the ownership of the server from its usage. In any business, depreciation of the hardware assets measures how much and how quickly they lose value. With decrease in their value, the business can knock off that amount as an expense against earnings. Since you do not own the asset, you do not have to worry about the hardware depreciation costs. You actually save on them.
When Is It Good To Buy The Servers?
Servers come with high-priced tags but are essential for businesses. There are certain factors that help you decide on buying servers.
If you have an established company and have a big budget available, you can buy brand-new server/s with the newest technologies and hardware and maintain them. You also need to pay for the network and electricity it will consume. You can invest in purchasing servers to increase the performance of your business and keep it secure.
- IT Expertise
When considering buying your own server, you need to understand the technology and some level of IT or technical skills. They are required to handle and manage the server for its smooth functioning. Otherwise, you can go for a managed leased server so that your host handles the server completely.
Whether the data is your personal or of your company, it can be sensitive. And so, you would want that it resides in your home or offices only. Owned servers offer the much-needed privacy and protection for your confidential data.
The physical proximity of your servers is important, so they should be located near to your place of work where servers are used. It is more productive and time saving to store the data locally. A local network offers better latency and speed than an internet-based service in a far location.
You may have some business scenarios where you need to have your server configured in a specific way, and that might not be readily available in a leased server arrangement. When you purchase a server, you get to configure and customize best server which suit your needs.
What Are The Benefits Of Buying The Servers Over Leasing?
Owning a server is a practicable option in different scenarios, as buying a server also offers its share of benefits.
- Easy Process
Buying servers is easy. Once you decide which server you want, you just purchase it. Leasing, however, involves detailed paperwork and lease terms and conditions. You might have to give your detailed financial data to the leasing company. Leases can become unfavourable for you if you are unable to negotiate the terms properly.
- Complete Ownership On The Servers
The server is yours when you buy it; you own it. You buy a server according to your business needs, with the budget available. No outside party is involved. The ownership of all the decisions about buying the server and the server itself rests with only you.
- Maintenance Ownership
The responsibility to maintain the server lies with you. With leasing, you maintain the server as per leasing company’s stipulations. It can sometimes turn out to be costly for you. When you buy and own the server, you decide on its maintenance program.
- Good Savings For Long Term Usage
You buy a server when you know that you will use it for a long time. So, you just make one-time investment in acquiring your server, mostly by paying the whole amount in one shot. You do not have to pay interest or any other charges every month, like in a lease agreement. Buying reduces your costs and saves you in the long run.
- Tax Savings Through Depreciation Deduction
Buying the server also adds to your tax savings as it can be deducted on your tax return as a newly bought asset in the first year itself. It can be shown as a depreciation deduction. Your depreciation expense will lower your income that can be taxed, thus reducing your tax liability.