A Publication of iSeries 400 Experts Total Information Service

New offer lets shops upgrade leases from Regatta
to System i at discounted rates

By Davin Wilfrid
Monday September 04, 2006

IBM says shops leasing older iSeries boxes can boost speed and functionality, while saving money, by upgrading to newer System i hardware. While analysts disagree over the merits of leasing versus buying, some shops may find the low rates too great a bargain to resist.

The offer, from IBM Global Financing (IGF), is called “Get More, Pay Less.” Big Blue says shops currently leasing Regatta iSeries boxes can save 10% or more on monthly payments by upgrading to the latest System i hardware. The offer is good through the end of the year, though rates as low as 2.99% are only available through September 30 (see box on page two for details and eligibility).

“Get More, Pay Less” is targeted at shops looking to ramp up capacity before the holiday sales rush. Many System i shops will be looking to ensure they’ve got enough computing power to handle the busy season, says Danny Gold, sales team leader, IBM Global Financing, Armonk, NY.

“There are a number of iSeries customers out there with the older boxes, and as we approach the fourth quarter selling season, they’ll be looking to ensure they’ve got the capacity to meet their business needs,” says Gold.

Shops leasing iSeries Models 810, 825, 870, or 890 are eligible to upgrade to System i Models 520, 550, 570, or 595 by extending their leases for a minimum of 36 months. Monthly payments are determined by the configurations of the existing servers and the new servers, but IBM says many shops will see their monthly bills go down by upgrading.

“It’s nice to quote rates, but the important thing is what [shops] are paying monthly for this box,” says Gold.

Lease or buy? Your choice depends on more than money

While some shops choose to lease because low monthly payments free up cash flow for other parts of the business, analysts say companies should have a comprehensive IT plan in place before jumping on a low-rate lease offer simply to save money.

“A smart customer no longer buys boxes in a discreet fashion. Normally they do it as part of a bundled solution, maybe from an ISV or an IBM business partner. A box, within that plan, is actually going to be a small part of the budget. Just taking one factor (the lease rate) for a particular upgrade is oversimplifying life. Life doesn’t work that way,” says Bob Djurdjevic, president, Annex Research, Phoenix, AZ.

Djurdjevic, who once worked as an independent lessor, says some managers choose to lease and extend leases because of simple inertia — and are overmatched by IBM in negotiating lease terms.

“Leasing is a complex business. It’s not just a matter of the lease rates during the course of the deal. You must also consider the down payment and the residual value [of the equipment] at the end. The combination of all these factors determines how good a deal you get,” says Djurdjevic.

IBM calculates lease rates by factoring in down payments, the length of the lease, and the residual value of the equipment at the end of the lease. Gold says IGF subtracts a portion of the expected residual value of the equipment from the overall lease cost.

Some analysts say leasing could also save customers money because shops would not need to pay for costly major upgrades or replacements. Factoring in the maintenance costs of older boxes, the total cost of ownership (TCO) of leased machines can be less than purchased boxes. One analyst says companies should take a long look at their IT costs before making a decision.

“People really need to look at TCO over a period of years. They need to factor in all of the components, and it can be tedious — nobody wants to do that, but it’s important. A TCO analysis does not have to go down to the last penny, and it doesn’t have to be an algorithmically esoteric process. It’s just to take a good hard look at what your costs are. And I think you’re better off leasing because you will eventually have to upgrade or replace the system — and that can be costly if you own. If you’re a business that’s growing, expanding, and becoming more competitive, there are a lot of features and functions that are going to be added [through upgrades] that can give you a more competitive edge,” says Maria DeGiglio, president, Maria A. DeGiglio & Associates, Fair Lawn, NJ.

DeGiglio says leasing also offers shops an easier way to stay current with the latest hardware and software. “IBM has been on schedule rolling out new offerings and new releases, so there is a definite desire to get people up the newest release and box sooner rather than later. People have to look at how they do business. They have to look at how they’re positioned strategically and competitively, and where improvements need to be made — and they need to do this from a business perspective. It is the business perspective we miss when we talk about computers.”

For more information, see www-03.ibm.com/financing/us/hardware/
offerings/systemi.html??ca=slot6&me=W&met=inli&re=ps&trac=S082506US06.