Let me outline some of today’s challenges for IT Administrators. First, after three years (the depreciable life), servers have almost no economic value and can easily go unnoticed or forgotten, causing a stranded assets problem. Second, the industry life of a server is often only 24 months, yet the depreciable life is three years for servers. In other words, accountants want to keep equipment around for a full year longer than the servers are actually providing competitive industry value. Third, refreshing technology at the right time is difficult to plan and even harder to implement smoothly. So IT Administrators are trying to manage risks of stranded IT assets, technology obsolescence, and business disruption all at once. This is nothing to say of complying with new green laws for the responsible disposition of servers and other IT assets --- another formidable management risk.
VFS leasing protects against the risks of stranded IT assets, technology obsolescence, and business disruption via our technology refresh program. The refresh program is usually offered on a 36-month term due to today’s shortened server life cycles. Since the industry life of a server can be only 24 months, during which it is providing some sort of technological advantage, ideally the customer is better off replacing it at month 24. Fortunately, the fair market value of a retired server also can be captured best at about the same time of its useful industry life --- at month 24. The challenge for IT Administrators is to establish a structured plan for technology refreshes that minimizes stranded assets, avoids costly accounting write-offs, and provides non-disruptive migrations to new technology. And don’t forget the need to dispose of servers in a compliant fashion. There is some good news: VFS lease financing solutions can help manage and minimize all these risks.
The four risks of stranded assets, the negative accounting impact of non-depreciated servers, refresh disruptions, and compliance with green laws for proper equipment disposition --- all can be minimized in a VFS lease using our technology refresh program. This is because VFS understands how to structure technology refreshes within 36-month leases so that the customer receives excellent fair market values for the technology being replaced and receives migration services for the new technology. Risks of technology obsolescence and business disruption are minimized. VFS’ remarketing services arm ensures that customer will benefit from the highest fair market values available for older servers. Verari Professional Services will plan and assist the customer with refresh and green disposition services that meet scheduling requirements.
Here’s an example of how VFS has successfully structured leases with refreshes in the past. On a 36-month lease, we have found it advantageous to refresh technology during month 24 of the lease. VFS offers flexible windows for this to occur, but six-month refresh windows are typical. Also at month 24, a new 36-month lease is begun that includes the new servers. From the start, customers are quoted a monthly payment for both the original servers and the new servers. So I’m convinced that VFS is able to give customers a solid financial plan that reduces financial, technological, and business risks. What’s more, the new servers do not increase monthly payments by more than 20%! Not many leasing companies are providing such a valuable service that takes into account longer term IT asset life cycle management.
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