Leasing video conferencing equipment: Easy upgrades or bigger hassle?

Telepresence and IP video conferencing are still evolving, making a large investment painful if it becomes obsolete in a year. Leasing programs for high-end video conferencing equipment are an option if you don't mind the hassle of a regular rip-and-replace.

Leasing video conferencing equipment allows enterprises to trim capital expenses while keeping pace with the ongoing

advances in Internet Protocol (IP) video conferencing and telepresence. But for some enterprises, the headache and hidden expenses of ripping and replacing these leased systems every few years makes even outdated video conferencing equipment worth owning.

Video conferencing is far from an immature technology, having first gained traction with enterprises via Integrated Services Digital Networks (ISDN) in the 1980s. But it hasn't finished evolving. Newer IP-based systems are in a state of flux as vendors consolidate and hash out ongoing interoperability problems, which can make leasing attractive to IT organizations concerned that a technology's obsolescence will outpace their return on investment.

Attractive lease or financing programs with low interest, little money down and affordable upgrade paths hold little interest for Paul Pataky, supervisor of IT infrastructure at S&C Electric Company, an electrical power systems equipment manufacturer based in Chicago.

Overhauling S&C Electric's dozen or so legacy, room-based Tandberg video conferencing systems for flashy high-definition (HD) or telepresence suites across multiple sites would be financially and logistically unrealistic, even with the savings of a lease program, Pataky said.

Upgrading to telepresence or HD video conferencing equipment would require "almost everything" to be replaced, and his wide area network (WAN) would probably need double or triple the bandwidth to accommodate the heavier load, he said. Installing one of Cisco Systems' high-end telepresence suites can ultimately cost $80,000 to $300,000. Pataky pays $6,500 per camera for his existing Tandberg deployment.

"Between the cameras and the audio equipment, let alone the monitors, for us to try to implement that at all locations would probably be ridiculously expensive," Pataky said. "Typically, we lease equipment here if we think we're going to replace it in three years. … If we were going to make that kind of investment, I would hope we would get more than three years' use of it, so I don't think it would appeal to us."

"There are some organizations that specifically look for these [leasing] programs because of that [affordable upgrade] benefit. They specifically don't want to be stuck with something long-term," said Ira Weinstein, senior analyst and partner at Wainhouse Research. "[But] I have a lot of clients that are using older hardware, and they're happy with it. Old often means reliable, old often means understood and old often means easy to manage."

The choice to lease video conferencing and telepresence equipment in a large enterprise is usually based on corporate culture and money management preferences, according to Weinstein. For small and medium-sized businesses (SMBs), the ability to lease video conferencing equipment helps "chisel away" the total cost of ownership (TCO) to ease the path to adoption, he said.

Purchase price is becoming less of a barrier to adoption, Weinstein said. Ultimately, the IT and finance organization's corporate culture decides whether an enterprise leases or buys video conferencing equipment.

Lease programs market smoother upgrade path for video conferencing equipment

LifeSize is the latest vendor to unveil a program for leasing video conferencing equipment -- Flexible Leasing -- launched as part of its new channel partner program and aimed at U.S. and Canadian SMBs. Like most programs, it includes an end-of-term buyout or upgrade option.

Old often means reliable, old often means understood and old often means easy to manage.

Ira Weinstein
Senior Analyst and PartnerWainhouse Research

Operated in conjunction with TAMCO Corp -- an independent leasing firm for telecommunications equipment -- the LifeSize program offers a traditional capital lease as well as its Smart Lease option, which enables a customer to break contract and upgrade mid-term without penalty, according to Dan Sibille, director of Americas channels at LifeSize. The program is especially suited for enterprises that believe in ripping and replacing often in order to keep pace with industry advances.

"If you just leased this year's technology … for two years and halfway through you figure out, 'Wow, had I waited, I could've had this new device or this new endpoint,' the Smart Lease program actually allows you to come out of the older equipment … with no penalty," Sibille said. "With a capital lease, you'd be stuck."

In May, Polycom formally launched its global leasing program, Polycom Capital, for video conferencing equipment, installation, maintenance and service costs. Before the launch, leasing agreements had been arranged on an ad hoc basis and only for U.S. customers, according to Polycom sources.

Although Polycom initiated the program in response to increased demand for more affordable financing options amid the worldwide recession, the program has yet to gain traction, according to spokeswoman Robin Raulf-Sager.

"While leasing offers added flexibility to our customers, we've seen only limited uptake to date," Raulf-Sager said. "Our leasing program is relatively new … [but] if we look at companies with long-standing leasing programs, we know they've had success in this area -- with up to 30% of sales financed. There is definitely a learning curve involved, for both our sales teams and our channel partners."

The latest lease offers from Cisco Capital, Cisco's financing division, include no payment and no interest for three months after a telepresence and unified communications hardware, software or bundled services deployment. The program, available for U.S. and Canadian enterprise customers only, is open until July 30, 2011.

Let us know what you think about the story; email: Jessica Scarpati, News Writer

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