Proebsting's Law

Jacqui Caren jacqui.caren at
Thu Dec 15 10:41:07 GMT 2005

Merijn Broeren wrote:
> Quoting Matt Sergeant (msergeant at
>>Depends which end of the scale you're at. At this end I bet hardly 
>>anyone rents because they have serious security issues to consider. 
> Those can be handled actually. 
>>Plus we get economies of scale doing it ourselves.
> But there are very large discrete thresholds to get over if you scale
> up. Like if you run out of power, or space, or cooling capacity. Adding
> just a hundred boxes becomes very expensive if you need to put in
> another megawatt of power. So leasing out for some self contained
> computing part that doesn't need to connect back into your corporate
> network too much (just deliver work done) makes sense if it keeps you
> from buying another 100 million dollar datacenter. 

Perhaps this definition of terms is different to you big wigs :-)

Purchase (buying machines outright)
   you claim back depreciation at revenoo rates.
Rental  (obtaining but not owning machines)
   You claim as business expense.
Leaseback - You buy a machine, "sell it" to the leasor
   and rent it back  from the leaseback company.
   Again an expense. AFAICR different (better?) tax implications.

I never considered leasing hardware and rack space as an issue/option.

In each case you end up with the same hardware in your rack (whereever 
that may be), but the effect upon the business is significantly
different both cost and tax wise.

For smaller businesses that purchase a small box in a co-lo rack
(from the co-lo provider) they can often use leaseback to remove
the initial cost and eliminate the hassle of trying to get the
revenoo to accept it's depreciation as a valid business cost.

If the revenoo only accept a 5 years full depreciatin cycle
and your hardware is obsolete over three years, you lose
20% of value as a tax claim. If your boxes are on a 3 year
leaseback or rental plan, you may pay more than the original
cost, but get more back against tax, so costing you less
when tax is taken into consideration.

I have to admit - this gives me a headache :-)


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