CIO — The infrastructure needs behind Weather.com’s operations are a lot like Mother Nature herself?difficult to predict and constantly changing. The online weather forecasting site, which is affiliated with The Weather Channel, gets an average of 10 million page views per day, but when a major weather event is looming, that number can surge to 40 million. Owing to the unpredictability of its traffic volume and the imprecise nature of weather forecasting, Weather.com relies on 123 IBM servers to accommodate the myriad weather watchers who flood the site in search of continuously updated information.
So how does Vice President of Technology Dan Agronow know his servers are going to be able to keep up with demand spikes and general growth? For starters, he upgrades every two years. Rather than purchase his systems, however, Agronow leases his equipment as a way to facilitate those scheduled upgrades. "By doing a lease, you can refresh your whole environment," he says. "This is definitely a benefit because you can keep your infrastructure homogeneous." Agronow adds that short-term lease agreements not only enable him to maintain technological capacity and compatibility but also provide a sufficient ROI.
And Agronow is not alone. Rob Enderle, vice president and research fellow at Cambridge, Mass.-based Giga Information Group, says the IT leasing market has grown steadily in the past few years. Businesses are turning to leasing for several reasons, he says, such as an increased difficulty in obtaining capital for equipment expenditures, flexible balance-sheet reporting and regular equipment replacement cycles. In addition, the market is expected to grow from $10.7 billion in 1999 to $15.9 billion by 2003, according to "Status and Outlook for the U.S. IT Leasing Marketplace," a study from Arlington, Va.-based Equipment Leasing Association.
Understand the Basics
Making the decision to lease or buy is not for the faint of heart. There are more complicated factors to consider beyond comparing the anticipated return for leased equipment with that of a purchase. Read on to learn some basic tenets.
Initial Capital Outlay If the total cost of equipment exceeds the available operating budget, leasing may be one way to avoid an initial capital expenditure.
Interest Rates Changes in interest rates will affect future payments and the total financial commitment of the lease. For instance, if the lease is renegotiated, the interest rate applied to remaining payments could change, affecting not only the monthly payment but the total amount paid out over the life of the lease.
