To Lease or Not To Lease

School Administrator, April, 1998 by William A. Hamilton

You are responsible for leading technology initiatives in your school district, but your community is not interested in funding a bond issue to purchase computers that will be obsolete before the debt is retired. Your capital outlay budget won't support a 3- to 5-year cycle for the purchase of new computers. Your educational community wants computers, and the staff, students and parents are growing impatient.

If this scenario sounds familiar, you might be facing circumstances similar to those experienced in the Walled Lake, Mich., schools three years ago. After three unsuccessful attempts to pass a bond issue containing new computers, we explored the option of leasing. We are glad we did. Now in our third year of such an arrangement, we are leasing 1,150 personal computers and plan to lease another 2,350 before we reach our baseline target of 3,500 computers to serve our 13,200 students.

So why did leasing make sense for us?

Reluctant Voters

Like many school districts, Walled Lake was in the habit of passing bond issues to support the purchase of computers. And, similar to most, the time between bond issues was such that it left users with computers that were old and outdated. Five years ago, our elementary school computer labs had Apple II's and our secondary school labs had a combination of old 8088's and 286 PC's. While teachers and students were surfing the Internet at home, they were limited to the most basic software at school.

The school district, through its strategic planning process, had a welldefined technology plan that included technology staff developers in every building. The plan also called for developing performance benchmarks in the use of technology for all students. But we were unable to implement the plan because of the limited computer resources.

In defeating three bond issues (ranging in size from $114 million to $136 million) over a four-year period, the community was sending us this message: Fund the computers without bond dollars. With professional staff members crying out for new equipment, we decided it was time to explore other options.

A Budgetary Perspective

As we began changing our paradigms with regard to computer acquisition, we set out to define the major issues surrounding computer purchases. The two major factors that repeatedly surfaced were budget and organizational structure. It was impossible to examine one in isolation of the other.

As we studied the costs associated with our technology structure at the time, we realized our largest expenditure was in computer maintenance. We employed two full-time technicians to repair computers in 19 schools and the central office, and they had an operating budget for repair equipment, parts and supplies. Between salary, benefits and operating expenses we were spending about $130,000 per year to maintain computers.

In addition, because our computers were old (making replacement parts hard to find) and the volume was so large (500 computers per technician), our capacity to provide efficient service was severely handicapped. It was not uncommon for a computer to be out of service for four to eight weeks. This analysis dictated the first condition of a lease proposal: on-site repair or replacement for the life of the lease.

If the cost of leasing, including on-site repair/replacement, would not exceed an outright purchase by more than $130,000 (our budget for computer maintenance), we would save money. Also, we would add value by dramatically improving our repair rate. Because we intended to increase the number of computers in the district by threefold, the difficulties associated with computer maintenance would only become more problematic, from both budgetary and user perspectives.

Furthermore, as our networks were expanding at lightning speed, the hiring of a skilled network administrator was inevitable. Leasing would allow us to offer these new job advancement opportunities to our current computer repair technicians, thus avoiding layoffs since we had eliminated their previous positions. While not an easy sell in the beginning, both employees now enjoy their new enhanced roles.

Coping With Obsolescence

As we further examined the possibilities of leasing, it dawned on us that if we built maintenance into the life of the lease, we didn't need to lease new machines. Traditionally, when we purchased computers, we bought the latest-and-greatest machines, knowing they would be around for an indefinite period of time. If through leasing, we could develop a reasonable replacement timeline, we could be more flexibile in our specifications.

As we talked with vendors about leased computers, we discovered that three years was a common lease window. This time frame would become our next specification.

To ensure that teachers, administrators and support staff would have the up-to-date equipment for achieving their goals, we developed a process, borrowed from the business world, by which a user could build a case for an upgrade within the three-year window. Not only would users be assured of an upgrade every third year, they could have one within the three-year window if they could build a value-added case.