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Stretching IT Budgets with Flexible Financial Solutions

Stretching IT Budgets with Flexible Financial Solutions. Anita Brennan Compaq Financial Services. Agenda. Compaq Financial Services Overview Advantages of Financing Technology Financial Alternatives and Examples Next Steps. Compaq Financial Services Overview.

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Stretching IT Budgets with Flexible Financial Solutions

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  1. Stretching IT Budgets with Flexible Financial Solutions Anita Brennan Compaq Financial Services

  2. Agenda • Compaq Financial Services Overview • Advantages of Financing Technology • Financial Alternatives and Examples • Next Steps

  3. Compaq Financial Services Overview • Compaq Financial Services (“CFS”) is a wholly owned subsidiary of Compaq Computer Corporation • In 1997, Compaq formed an in-house equipment leasing and financing unit, to finance technology solutions for Compaq customers • Headquartered in Murray Hill, NJ we have a dedicated GEM operations and sales organization • CFS custom-tailors leasing and financing packages for the full range of Compaq’s products and services, as well as non-Compaq offerings that might be part of a total Compaq solution

  4. Why Finance Technology? WHAT YOU MAY NOT KNOW: • Over 90% of all U.S. corporations and 40% of all government entities finance all or some of their equipment (ELA 2000) • Gartner Dataquest predicts by 2003, 60% of all IT acquisitions will be leased • Leasing provides GEM customers the ability to leverage existing budgets, thereby acquiring more equipment than possible with purchasing • Leasing avoids the costs of surplus property disposal • 325 million PCs will be obsolete by 2005

  5. Why Choose Alternative Financing…

  6. Funding Alternatives Cash • Capital expense funds are limited • Provides one time solution Bank Loans • Not willing to assume residual risk • Most do not retain lease paper for their own accounts - making upgrades very difficult Bonds • Fee intensive (.5% - 1%) • Very time consuming • One time technology solution • Subject to voter rejection • Poor matching of term vs. useful life

  7. Total Cost of Acquisition CASH LEASE BONDS Equipment Cost $100,000 $100,000 $100,000 Financing Cost 7,771 6,560 58,400 (Opportunity Cost = 5.5%) (36 pmts of 2,939) (5% 20 yr. Bond) Disposal Costs 3,000 03,000 Total Costs $110,771 $106,560 $161,400

  8. S-t-r-e-t-c-h Technology Budgets A lease over a cash alternative enables over 3x the number of units deployed on Day 1 of an IT acquisition. Example: Technology Budget $341,000 YEAR 1 YEAR 2 YEAR 3 CASH OPTION 341,000 341,000 341,000 CASH Units/ea yr 341 341 341 CASH Units/total 341 682 1,023 LEASE OPTION 341,000 341,000 341,000 LEASE Units/ea yr 1,000 0 0 LEASE Units/total 1,000 1,000 1,000

  9. Flexible Financing Alternatives • Lease terms ~ 12 to 48 months • Various structures ~Quarterly,semi-annual, & annual payments • Cost per seat/Managed Services Plan • Technology refresh lease • Non-appropriation clause option for public entities • Equipment add-on and upgrades can be incorporated throughout the lease term • Simple application & approval process

  10. Technology Refresh Lease • Stay ahead of the technology curve • Built in ability to upgrade at month 24 or 36 • Allows for equipment refresh prior to the end of the lease term • Keeps computer systems current and guards against technological obsolescence

  11. The Laptop LeaseExample: Based upon acquisition of 75 units New Laptop $1,500 Year 1 Year 2 Buyout $716 $716 $165 $358 per Semester Over 2 years, pay for less than cost of laptop

  12. Q2 Special Offers • 0% Free Time Lease: -- 30 mos FMV, all COMPAQ -- 24 mos FMV, equipment mix • 120 Day Deferral Lease: -- any term, 1st 120 days no interest, no payment • Single Payment Lease: -- 36 mos FMV, 95% payment

  13. Next Steps • Review Technology Plan • Discuss budget issues/financial alternatives with Compaq and CFS SOLVE your budget issues TODAY with CFS alternative financial solutions!

  14. Contact Information

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