Enterprises can benefit from renting hardware and flexible software subscription models in many ways. The free choice of both hardware and software elements gives them the flexibility to scale IT landscapes faster and to better fit them to their unique demands.
Additionally, enterprises avoid 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 with many organizations. Indeed, CapEx may be attractive in some ways regarding lengthening life cycles. Benefits lie in depreciating assets and the cheap renewal of software licenses – but only at first glance.
Actually, this strategy causes additional costs:
Maintenance costs rise exponentially over time.
Cooling and power costs rise during 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:
The availability of software or security patches and updates is not guaranteed after years of use. Security systems are 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 an economic damage of 16.4 billion euros per year.
Continued usage beyond the optimal lifespan of hardware and software increases downtime. IT breakdowns can cost up to about 40,000 euros -- per hour!
The perpetual licensing model guarantees rapid deployment of modern and efficient hardware generations and latest software versions. Subscription covers software upgrades including major and minor software releases, all software updates including security patches as well as technical support at no additional costs.
From an income tax perspective, companies prefer OpEx to CapEx. For example, rather than buying a firewall for 9,000 €, an organization could subscribe to the software for 100 € and lease the hardware from another vendor for 100 €. If it buys the complete solution, the company only can deduct a third of the amount in the first year and it takes three years until the purchase amortizes. The amounts for leasing the hardware and for the software subscription are operational costs and can therefore be deducted fully from the start. The initial costs of buying a firewall do not cover updates and service which causes additional expenses.
Business owners and CEOs should be aware of the growing demand for flexible IT services, especially in the light of increasing digitalization. Being transparent about corporate IT and its ability to keep pace with fast changing demands without additional investment gives organizations a competitive advantage.