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Managing Equipment: The Right Mix

Wall Street firms are applying portfolio management techniques to IT hardware and software, focusing on managing leased and purchased servers and other IT equipment efficiently and creatively.

A close collaborative working relationship between the two executives often is the key to structuring a deal in the best interests of the firm, Matteoni continues. However, the responsibilities of each executive can create tension between the CFO and CTO, he notes. Often, the CTO is most concerned with making sure the firm has cutting-edge technology, while the CFO is responsible for getting the most bang for the firm's buck.

As CTO, "My goal was to continually get fresh equipment out there around every three years - four years at the worst," Matteoni relates, adding that a three-year upgrade cycle allows a firm to keep its technology fairly fresh. Though he declines to offer specifics about the technology arrangement at UMB, Matteoni says, "I always did lease when I was with other companies. There is a shelf life to hardware, and it becomes obsolete because the software you are going to run on it requires bigger and faster machines. If you buy it and try to keep it too long, you are going to wind up with some problems."

No matter how tight budgets are, holding on to technology too long is not the answer, Matteoni stresses. "If you are looking to save pennies by saying you can keep something for one more year, then you will wind up paying more later on," he says.

Still, according to Robert Schafer, senior program director of technology research services with Stamford, Conn.-based Meta Group, more and more firms are opting to keep their IT hardware - specifically PCs - for a fourth year. "There is a clear tendency to extend life cycles of hardware assets," he says. However, Schafer concedes, "Increased maintenance costs as the years wear on mean holding assets longer than four years is not practicable."

If a firm is intent on keeping its hardware for an extra year, Schafer says, it's important to have the maintenance agreement mirror the anticipated life of the assets. In other words, if a CTO plans on leasing equipment for four years, the firm shouldn't arrange a three-year maintenance plan. "If you don't [extend the maintenance agreement], you are faced with whatever the vendor wants to charge you during that last year," he warns.

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