Enterprises can benefit from renting hardware and flexible software-subscription-models in many ways. The free choice of both hardware and software elements brings the flexibility to scale IT landscapes faster, and to better fit their unique demands.
Additionally, enterprises avoid single-vendor-lock-ins. Newer hardware platforms lower the total cost of ownership (TCO) by consistently increasing the price-performance ratio while consuming less power. The pay-per-use approach of software applications makes this much more affordable and generates clear CapEx and OpEx savings.
Buy-and-hold-strategies like capital or operational expenditures (CapEx, OpEx) are still very popular for many organizations. Indeed, CapEx may be in some ways attractive in concerns of lengthening life cycles. Benefits lie in depreciating assets and the cheap renewal of software licenses – at first glance.
Actually, it causes additional costs:
Maintenance costs rise exponentially over the time.
Cooling and power costs rise in the last years of operation. According to an IDC research power/cooling costs grew eight times faster than server acquisition costs.
Costs of replacement rapidly climb after five and more years.
Not to mention increasing related costs and losses caused by irresponsible security risks:
Availability of software or security patches and updates is not unrestrictedly given after years of use. Security systems are then more likely to become vulnerable.
Systems fall far behind the performance and efficiency levels of more recent versions. An increase of TCO is unavoidable.
Cybercrime causes a yearly economic damage of 16,4 billion euros.
Continued usage beyond the optimal lifespan of hard- and software increases downtime. IT stoppage can cost up to about 40,000 euros -- per hour!
The perpetual licensing model guarantees rapid deployment of modern and efficient hardware generation and current software versions. Subscription covers software upgrades incl. major and minor software releases, all software updates incl. security patches as well as technical support at no additional costs.
From an income tax perspectives, businesses prefer OpEx to CapEx. For example, rather than buy a firewall for 9,000 € an organization could subscribe to the software for 100 € and lease the hardware from another vendor for 100 €. In case of buying the complete solution a company only can deduct a third of the amount in the first year and it takes three years before amortization. The amounts for leasing the hardware and software subscription are operational costs and therefore can be deducted fully from the beginning on. Initial costs of buying a firewall do not cover updates and service and cause additional afford anyways.
Business owners and CEOs should point out the growing demand for flexible IT services, especially in the light of anticipating digitalization. Being transparent about corporate IT and its ability to keep pace with fast changing demands without additional investment is business critical for an organizations competitive advantage.