Buy or lease?

PCCW evaluated three options: maintaining its status quo, pumping in capital expenditure to replace its old platform, or work with Sun Microsystems Finance on a "Maintenance to Lease" financial solution that enabled it to utilise its existing maintenance budget for the server consolidation project (including hardware, professional services and support services). "We evaluated the three options and found the leasing option to be most cost-effective," says Louie.

Sun Microsystems also put in place a technology refresh option starting from the eighth quarter, providing PCCW the option to swap the equipment for the latest Sun technology and enter into another lease. This, says Adrian Pang, Sun Microsystems Finance Asia Pacific managing director, ensures clients like PCCW have the flexibility to scale their infrastructure needs as their business grows. In addition, the deal for PCCW also caters for asset disposal with end-of-lease options to migrate to new Sun equipment with a new lease, return the equipment without further obligation, or purchase the equipment at the then-prevailing market value.

As for the possibility of being locked into a cycle, Louie says this is not a downside. "We believe that our other options do not prevent us from being locked in to a vendor for four years. The truth is, our ISP business is not going to vanish in four years, and we need to have a platform to run our services."

Banking on flexibility

Pulling the plug on its legacy platform - and banking on new technologies to lower total cost of ownership - is also the logic pursued by the Bank of New York Company, Inc., a commercial bank founded in 1784 but has since transformed itself to a premier global securities service provider by focusing on high-growth, fee-based business.

Alan Goldstein, senior vice president, Messaging Software Division, Bank of New York, says that the bank leverages technology to more effectively meet client needs and improve productivity while developing new products. IT investment increased from US$308 million in 1997 to US$655 million in 2002. Of course, it also keeps an eye out for new technologies that can give it a competitive edge and reduce the cost of delivering services. "We understand that to keep pace with the change in the banking world, our IT infrastructure must provide a high degree of flexibility and reliability at the lowest possible cost," says Goldstein.