Should you rent or buy technology is one question that frequently arises for small business owners and owners / managers of medium-sized businesses? The answer to this question is, “It depends.” It depends on several factors including the criticality of the technology to your business, the overall initial cost of the hardware or software, the ongoing costs of updates and more.
Software as a Service (SaaS)
I have worked at or owned several companies with revenues below $10 million. My stance is to use SaaS (software as a service) as much as possible unless the cost multiplied by the number of employees is significantly higher than the cost of purchasing the software or hardware outright. For example, we had old servers in-house that repeatedly broke down. We could have replaced those servers with new ones. However, even with nearly 50 employees, we decided to move our storage to the cloud to enable us to work remotely and to work from multiple locations.
If your company is growing rapidly, using cash to grow, or potentially relocating, if your employees are highly mobile or work remotely or if you or others in your company are uncertain about a particular technological solution, then I would use SaaS and rent or lease hardware. The sole exception is if extremely high security is needed, such as that required by some financial services firms.
Obsolescence and costs
Most hardware and software become obsolete over a short period unless you implement continual upgrades. Paying for the maintenance and upgrades on owned software and hardware can stress cash flow. Therefore, it is typically better to share those costs with other entities that use the same platform or to lease and get a better deal because the lessor retains the residual value. This includes CRM, intranet enabling software, billing software (when customers prefer to pay digitally), office management software, server monitoring software and phone systems, unless your company has a long-term location lease and 10 or more employees.
Should you buy or rent technology depends on the above factors. It is a decision that typically does not apply across the board to all your small business technology needs but to most…and to others on a case by case basis.
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