Table 10.2 Comparison of Computer Systems Financing Options

Method of
acquisition
Advantages Disadvantages
Rental
Short – term commitment. High level of flexibility. Does not require cash upfront. Most expensive option. Little control of equipment change. Not all vendors will rent.
Lease
Predetermined payments for fixed period. Does not require cash upfront. Usually better service from vendor than under rental. Little risk of obsolescence. Less expensive than rental More expensive than purchase. May have limitations on hours of equipment use.
Purchase
Least cost in long run. Distinct tax advantages if a profit – making firm. A business investment. Full control over equipment use. Risk of obsolescence. Permanent commitment. Full responsibility for all problems. Greater early cash requirements than other options.
1.

10.5 Maintenance and Support
An additional factor in hardware decision concerns the maintenance and support of the system after it is installed. Primary concerns are the source of maintenance, terms, and response times.
a.
Maintenance Source
Once the system is delivered and installed, there is a brief warranty period during which time the sales unit is responsible for maintenance. This is typically a day period, although the specific terms fare subject to contract negotiation. After that time, the purchaser has the option acquiring maintenance from various sources. The most common source of maintenance for new equipment is the firm from which it was purchased. If a mainframe or minicomputer system is purchased through the manufacturer’s sales force, there is also generally a maintenance support group that provides service fora standard price. Large companies set national maintenance costs that are adjusted on an annual or semiannual basis. If the system is a microcomputer or personal computer, the dealer generally provides maintenance as a chargeable service. The buyer may pay a lower purchase price for personal computer purchased form mail- order houses, but may lose the convenience of local service. Lower service costs are one reason some mail-order firms are able to offer lower purchase prices. Service is also available from companies specializing in providing maintenance service. Third party maintenance companies as these firms are called, frequently provide service in smaller communities, where manufacturers do not find it cost-effective to maintain offices. In addition, sellers of turnkey systems, who deliver and install working hardware and software combinations but do not manufacture the equipment themselves, suggest the use of specific third – party maintenance firms with whom they work directly and inform of changes in hardware, software, and suggested maintenance procedures. Sales organization, the purchaser may have no choice but to use a third-party maintenance firm. Many manufacturers do not service equipment they did not sell.

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