MCPc Blog

Focus on Leasing: How to Manage Lease Schedules

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After successfully leasing new technology equipment and/or services, it is important to manage your lease schedules on an ongoing basis.  Lease schedules will affect future budgets and, without the proper attention, can cause you to make hasty decisions that may hurt your budgets, prompt you to make month-to-month payments, incur costly end-of-lease penalties and/or services.  The good news is that managing your lease schedules can be very easy, and if done correctly, put you in a position to be proactive with technology refresh projects.

Let's start with a quick definition: A lease schedule is simply a list of leased equipment and includes information such as the lease start date, term, monthly payment and an equipment description.  Below is a sample lease schedule.

It is common for lease schedules to be available in two basic formats: 

• Presented as data in a web browser, or
• A simple spreadsheet.

Most leasing companies and banks have some type of client-facing online tool that you can use to access this data over the web.

Here is where managing your lease schedules gets tricky, and why it can be helpful to standardize for internal management: Say you have elected to lease various technology products and services ranging from copiers and printers to PCs, laptops and servers.  You may have multiple lease partners and lease schedules from each partner.  In order for you to effectively manage all of these schedules, you need to place all of the data into one place, all in the same format.

Whether you choose to manage your lease schedules with a simple spreadsheet or a complex asset management database, you need to proactively get your hands on the raw data.  While each of your lease partners will be more than happy to share the data, each partners' data will come over in slightly different formats. 

The first step is to collect all of the raw data from each of your lease partners, and organize it into a consistent, usable format.  Once the data is organized, you can begin proactively managing your lease schedule and resulting technology refresh projects.

Tips for Effectively Managing Your Lease Schedules

1. As a part of your lease partner evaluation process, confirm that your potential lease partner will give you access to online tools that help you manage your lease schedules and schedule data.  Ask for a software demonstration.  Confirm that the leasing company's software meets your needs, is easy to access and easy to use.  You potentially won't use these tools on a regular basis, so even a small challenge may become a large one down the road if you don't remember how the software works.
2. Designate someone on your team that can become well-versed in leasing, your internal operations related to leasing and how your financial decision makers prefer to leverage leasing options.  Create goals or incentives for this person so that your technology refresh projects are proactively attended to in a way that minimizes cost.  Measure the results of this effort. It affects your bottom line.
3. Ask your preferred reseller or VAR how they can add value through lease schedule management.  It may be the case that the reseller or VAR has a solution, and all you have to do is ask for it. 
4. Leverage your lease schedule information to help budget for future quarters.  Your lease end dates tell a good story. You can basically count on some end-of-lease activities and a decision whether or not to return the products, buy them out or extend your lease.  Knowing your lease end dates gives you time to analyze your options, interact with the leasing company and get additional information from manufacturers and/or resellers and VAR before making a decision.
5. The success of a leasing initiative is often determined by your organization's ability to manage its equipment return process.  Working with the lessor, establish a process for communicating the disposition of each asset on a lease schedule at the end of lease.  The processshould be started well in advance of schedule expiration so there is enough time to have therefreshexecuted smoothly.
6. Consider structuring lease payments for seasonal fluctuations in revenues and/or structuring your lease agreement to make quarter payments based on quarterly lease schedules.  Using quarters instead of months can reduce the amount of volatility that you manage.  Less volatility means more control.  Also, it may be the case that your organization budgets on quarters rather than months.  Aligning your lease schedules with your budget cycles (either fiscal or calendar) makes leasing easier on the entire organization.

Managing your lease schedules is critical to managing and controlling your IT budgets and technology refresh projects.  Having a plan and building best practices around that plan will make your projects a success.  In addition, you will build additional credibility with the financial decision makers in your organization. 

Which method works best for you?  Please feel free to comment.

Focus on Leasing Topics:

1. Leasing Vocabulary
2. Financing Decisions
3. Advantages of Leasing
4. Capital vs. Operating Leases
5. Understanding My Payment
6. Picking a Lease Partner
7. The OEM Lease
8. Interest-Free Leasing
9. Managing Lease Schedules
10. Managing the End of Lease Process

Jeffrey Goldstein is Senior Consultant at MCPc and is responsible for the delivery of hardcopy and value added services within the Lifecycle Management Group.  Jeff earned his BS in Management of Information Systems and Supply Chain Management from The University of Akron and his MBA from the Weatherhead School of Management, Case Western Reserve University.  Connect with Jeff on LinkedIn.

Toner Recycling and Reuse

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Switching to remanufactured ink and toner cartridges can have a positive effect on your bottom line and the environment. With the struggling economy and the push to "go green," there has never been a better time to consider your business' use of printing and imaging supplies, and how you can leverage ink and toner recycling programs to lessen your environmental impact and save money in the process.

Remanufactured cartridges are essentially ink and toner cartridges that are developed using empty cores. Remanufacturers collect empty cartridges, inspect and clean them, then replace key components within the cartridge and remarket them as new, finished goods. These cartridges are designed to meet Original Equipment Manufacturer (OEM) page yields at a fraction of the price, and offer businesses and consumers alike a high quality, low cost, environmentally friendly alternative.

Landfills and Fossil Fuels

Each discarded laser cartridge adds approximately 2.5 pounds of metal and plastic waste to our landfills — waste that will take as long as 1,000 years to decompose. It is also estimated that 100 million laser printer cartridges, and 400 million inkjet printer cartridges, are produced each year. Remanufactur­ing these 500 million cartridges could save an estimated four million cubic feet of landfill space.

In addition to keeping waste out of landfills, remanufactured and recycled ink and toner cartridges dramatically reduce the consumption of ecologically damaging fossil fuels. The plastic in each new laser toner cartridge takes 3.5 quarts of oil to produce and each new inkjet cartridge requires 2.5 ounces of oil. A 2008 study completed by Best Foot Forward and commissioned by the Centre for Remanufacturing and Reuse found that the CO₂ emissions for a new cartridge were almost 2.5 times the emissions produced from a remanufactured cartridge.

Reuse, then Recycle

Simply stated: remanufacturing, or reusing, cartridges is the most environmentally responsible option. Aside from reducing consumption, reuse is the highest form of environmental responsibility — superior to recycling in that it doesn't use non-renewable resources to break down plastic and metal.

A cartridge and all its components should always first be evaluated for remanufacturing. If reuse is not possible, then responsible recycling should be pursued. This stance is echoed by multiple government agencies, including the U.S. Dept. of Energy Office of Industrial Technologies (PDF) and the Environmental Pro­tection Agency.

Closed-Loop Ink and Toner Recycling Process

Leading remanufacturers, like my company and MCPc partner Clover Technologies Group, evaluate every empty cartridge that is received first for remanufacturing and second for material recovery through recycling. A remanufacturable cartridge is disassembled and as many components as possible are reused, and any unusable cartridges and components are recycled.

In fact, we even have an on-site grinding facility, where unusable cartridge components are ground and recycled into new plastic products. This closed-loop environmental process ensures that every component of collected materials is either reused or recycled.

Recycling your used inkjet and toner cartridges is easy! In most cases, the company that you buy your supplies from has an inkjet or toner recycling program in place today — just ask about how you can participate. There are also recycling programs available at major office supply superstores (i.e. Staples, Office Max, Office Depot), and numerous websites are dedicated to the reclamation of used inkjet and toner cartridges. 

Purchasing Recycled Ink and Toner Cartridges

In addition to sending your old cartridges to ink and toner recycling organizations, you can often purchase recycled supplies through them. In addition to the environmental benefits of this option, your business can save money, as remanufactured cartridge prices are often 30-50% lower than new OEM cartridges.

I encourage you to think about these and other ways through which you can green your office environment this Earth Day and every day. What programs has your business put in place to lessen its environmental impact?

This post was guest authored by Michael Ducey. He has been in the office supply industry for more than 6 years, and is currently the Director of Strategic Accounts at Clover Technologies Group. 

Focus on Leasing: Taking Advantage of Interest-Free Leasing

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How can your organization leverage 0% interest leasing to your advantage?  As the IT decision maker, it is important to understand how and when to use this type of OEM program.  Remember: there is no free lunch.  When interacting with your finance or treasury department and financial decision makers in your organization, it is very important to have the facts of how your proposed 0% interest (or interest-free) lease works.

0% interest leasing is an OEM sales tool

I have yet to find a bank or leasing company that is willing to loan interest-free money. OEMs, on the other hand, are willing to provide this type of low-cost lease in an effort to hit their sales and revenue targets. A 0% interest lease program may be a wise use of your organization's money, so it important to understand the framework in which you will need to consider your decision. 

Also, if you already have a strong, existing lease partner, the OEM programs may be more difficult to justify, as there may be more complexities or risks involved in deviating from your existing lease partner — terminating that relationship may result in lower quality negotiations with them in future. Or, if the buyout of an existing lease is required to end the relationship, if can be expensive. Also, there is inherent risk in not knowing much about a new lease partner as compared to the partner you're already familiar in conducting business with.

However, there are certainly instances when entering into interest-free leasing agreements makes good business sense. Simply consider 0% interest leasing as an opportunity for additional product discounts. Previously, we talked about the fact that OEMs will often create special lease offers on a specific products that are in great supply, or may offer opportunities to buy any product within a specific lease structure — interest-free leasing can fall into both categories, and can be broken up into programs that suit the needs of small, medium and large organizations alike. 

Small Business Programs

As an IT decision maker for a small or medium-sized business, you understand that your budget for IT purchases may be limited, making 0% interest leasing an attractive option. 

One style of program offered by many OEMs that may help make your procurement less expensive is a short-term, 0% interest, $1-out lease. While the term is very short (typically 12 months), this type of lease is still considered a capital lease because of the $1-buyout structure and transfer of title at the end of the lease.  This is a great alternative to borrowing money or using a bank line to finance the purchase.

Understanding this program should be very straightforward: simply add up your purchase price plus sales tax and shipping, then divide the total by 12. Your calculation will be very close to your actual payment. 

The major drawback to this type of program is that services are typically not included in the lease — if you plan to purchase a products and services bundle, the 0% interest option will likely not apply. That being said, paying cash for the services and financing the hardware at 0% for 12 months is still a good deal.

Medium & Large Business Programs

In my experience, most mid-size and large organizations have strict lifecycle/refresh policies in place for technology. In addition, there may be more stringent finance and accounting rules regarding technology products and services purchases. As the IT decision maker, you should be aware of these policies, which may prohibit you from deciding to finance a large technology purchase for more than 12 months.

However, for these technology purchases, the OEM may also offer an interest-free FMV lease. This style of lease is much more difficult to deconstruct than the example above, as referenced in the post on understanding your lease payment, because in an FMV lease you're financing the fair market value, not the residual value, of the leased product/services. 

A 0% interest FMV lease is complicated for two reasons: First, the lease term is usually locked somewhere between 24-36 months, and secondly, the residual value of the leased products will be higher than normal. It may be difficult to compare an OEM's 0% interest FMV lease with a bank or leasing companies' FMV operating lease. 

The best place to start is to compare your estimated monthly payment from the OEM and another potential leasing partner.  If you are interested in the mechanics of how the OEM is calculating your lease payment, do not hesitate to ask questions — they should be more than happy to discuss your money factor, credit worthiness, and the product's residual value. 

OEM programs for 0% FMV leases tend to be very strict: the term is fixed, the money factor is fixed, the residual value is fixed, and your organization must have very good credit. There is, essentially, a "magic formula" that the OEM is using to come up with a 0% interest FMV payment — the manufacturer is getting aid from controlling the cost of their equipment, which they clearly get at a lower cost than anyone else, (also referred to as "blind discounting"). The interesting part here is that if you try to use the same lease factor against equipment not produced by this OEM, it cannot be done at the proposed rate.

The good news is that your organization will get a low monthly payment for a short-term operating lease. However, deviating from that "magic formula" by adding products not manufactured by this OEM, will likely result in additional interest charges. This points to one benefit of using an independent lessor — the lease factor will be more consistent across all equipment platforms.

Summary

Interest-free leasing is an option that OEMs use to provide their customers with additional product discounts. While each OEM has their own approach, there are a few basic styles of 0% interest leases. Make sure that you carefully weigh your leasing options, especially if your organization already has a preferred lease partner.

Has your organization taken advantage of interest-free OEM leases? Would any information here have caused you to consider a different path?

Focus on Leasing Topics:

1. Leasing Vocabulary
2. Financing Decisions
3. Advantages of Leasing
4. Capital vs. Operating Leases
5. Understanding My Payment
6. Picking a Lease Partner
7. The OEM Lease
8. Interest-Free Leasing
9. Managing Lease Scheduling
10. Managing the End of Lease Process

Jeffrey Goldstein is Senior Consultant at MCPc and is responsible for the delivery of hardcopy and value added services within the Lifecycle Management Group. Jeff earned his BS in Management of Information Systems and Supply Chain Management from The University of Akron and his MBA from the Weatherhead School of Management, Case Western Reserve University. Connect with Jeff on LinkedIn.

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Virtualization: Update on the Client Hypervisor

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Originally slated for release in late 2009 and early 2010, both Citrix and VMware have delayed the launches of their client hypervisors (Citrix XenClient and VMware Client Virtualization Platform) until, at least, the end of this year.

I mention only Citrix and VMware because they have emerged as early leaders in the client hypervisor space, but that does not mean they are the only players. Will the Citrix and VMware delays open the door for the others to swoop in and capture the client hypervisor market?  Only time will tell.

Why the delay?

It seems that those who are trying to get into the client hypervisor market should take a look at the history of operating systems in the x86 desktop world (i.e. desktop computers).  

One of the biggest issues that the PC hardware model, named "Open Architecture" or "IBM Compatible,"  has always brought with it is the need to support a large number of component manufacturers. Anyone can build devices that will work in this hardware model, which is why it is called "Open Architecture."  Each hardware component from each hardware manufacturer requires a unique piece of software called the device driver.  Device drivers are the biggest problem in the traditional operating system world and, it seems, are going to be an issue in the client hypervisor world as well. 

How much of an impact will this delay have on the desktop virtualization market? Likely, not much.  Currently, those who are looking at desktop virtualization are looking at shop floors, computer labs and the like.   These are considered the safe and least critical computers in a business environment.  You would never use the CEO of a company to test a new technology. 

End users with mobile needs will continue to be a part of the decentralized computing model for the next couple of years, and this is fine. Some end users will continue to need local access to a local computer with the operating system and software installed directly to it.  All new technologies take time to be adopted into the market, and the client hypervisor will be no different.

Looking ahead

By the time the client hypervisor is ready for primetime, the need for it will be present as well.  The decentralized model that we know today has been stretched as far as possible and it is no longer scalable or sustainable.  There are two few people supporting too many computers in too many different geographic locations.  IT departments know this but, until now, there was no other option.  Desktop virtualization, in general, and the client hypervisor, in specific, will provide the IT staff the ability to centralize - i.e. bring into the datacenter - the technologies, while still allowing for the offline access of that virtual desktop.  For now, the plethora of desktop virtualization technology that exists should be enough keep everyone busy and organizations supported with what we have at our disposal, so it is business as usual for IT professionals.

The best advice I can offer is to start your strategic roadmapping now, and keep an eye on the progress of client hypervisors and other developments in the desktop virtualization market. Ours is an industry that changes rapidly, and without staying abreast of the latest technologies available, we're only doing ourselves, and our companies or clients, a disservice.

Jason Dell is a Converged Network Solution Consultant at MCPc, and is responsible for developing and programming custom solutions for clients. His expertise includes network security and security for mobile devices in the enterprise. Connect with Jason on LinkedIn.

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Focus on Leasing: Leveraging the OEM Lease Program

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Technology OEMs (Original Equipment Manufacturers) know that product price is a very important factor when earning your business. What you might not have considered is how OEM leasing programs can help you reduce your costs even further.

It is common in many industries that an OEM/manufacturer will maintain a strong leasing program.  It has been proven that leasing, especially in the IT space, leads to more product sales.  Leasing from an OEM essentially gives you, the IT decision maker, access to more discount dollars.  

In my experience as an IT consultant, I have seen OEMs win multimillion-dollar lease bids against large banks.  This happens for a couple of reasons.  One, the OEM is very familiar with the products being leased, hence an aggressive residual position.  And two, the OEM can remarket the products after the lease term, hence an aggressive money factor.  As the IT decision maker, it is important to review this option before selecting a lease partner. However, keep in mind that choosing a leasing partner is long-term decision.  Picking an OEM based on your current project requirements may or may not be a good long-term strategy.

OEM Leasing Programs

Because of the positive impact on hitting sales targets, today almost all large technology OEMs have a finance or leasing department/division of the company. The OEMs creatively use their leasing and financing capabilities to earn your business through a programmatic approach. OEM leasing programs can basically be summed up into three categories. 

• Special Offers & Promotions - Apply to a small number of products
• Standard Lease Programs - Apply to a large number of products and services
• Custom Lease Programs - Apply to a large number of products and services

Special Offers & Promotions

Special offers and promotions fall into their own category because they are typically focused on either a specific product or a specific leasing structure. 

An OEM may, for example, create a special lease offer on a specific model laptop if that laptop is in great supply or is going to be end of life in the near future. Your money factor on this sale will be lower than the money factor used to price standard lease deals, and you may not be able to use this aggressive money factor for other products.

An OEM may also offer you the opportunity to buy any product you want within a specific lease structure.  For example, spend $25,000 or more on the OEM's Website and take advantage of 0% interest on a 12-month, $1 out lease. This smells like a capital lease with 0% interest, a potentially wise use of your money. This arrangement is similar to a retail store "same-as-cash" offer/promotion. 

This type of promotion is targeted toward small and medium-sized businesses. 

Standard Lease Programs

OEMs often offer FMV (future market value) lease programs, which typically work like the diagram below suggests.  Keep in mind that the OEM is playing a numbers game - giving up some of the product profit in exchange for interest rate profit and the ability to resell the refurbished products after you return them.

Remember, your money factor depends on the residual value of the products and services that you intend to lease.  Who understands a product's residual value better than its manufacturer?  The OEM is raising the residual (lowering the money factor) based on what they believe is the refurbished aftermarket value of the product. OEMs typically publish a rack-rate money factor schedule that can be used to calculate your lease payment. 

Custom Lease Programs

Custom lease programs operate similarly to standard lease programs, however they are typically used for large-ticket sales. For example, if your company is considering leasing $250,000 or more in products and services, there is a good chance that an OEM will put together a special money factor just for you.

Keep in mind that special money factors may have other provisions, such as quarterly takedowns and interim rent payments. As the IT decision maker, what you may find most interesting is how aggressive an OEM's lease rate will become when it comes to selling you a large quantity of products. If you work for a large organization, prefer leasing, and have frequent technology refresh projects, a custom lease program is likely a great option for you.

So, which option is right for you: working with an OEM or an independent lease partner?

Focus on Leasing Topics:

1. Leasing Vocabulary
2. Financing Decisions
3. Advantages of Leasing
4. Capital vs. Operating Leases
5. Understanding My Payment
6. Picking a Lease Partner
7. The OEM Lease
8. Interest-Free Leasing
9. Managing Lease Schedules
10. Managing the End of Lease Process

Jeffrey Goldstein is Senior Consultant at MCPc and is responsible for the delivery of hardcopy and value added services within the Lifecycle Management Group.  Jeff earned his BS in Management of Information Systems and Supply Chain Management from The University of Akron and his MBA from the Weatherhead School of Management, Case Western Reserve University.  Connect with Jeff on LinkedIn.