When it comes to managing your RIA’s IT infrastructure, one question can make a significant financial and operational impact: Should you own your IT hardware, or should you rent it through your IT provider? While renting—sometimes referred to as hardware-as-a-service (HaaS)—might sound convenient, it can cost your firm much more in the long run and come with unnecessary complications.
Let’s break down the key considerations and best practices for owning IT hardware, tailored for RIAs and financial advisor firms with 5 to 25 employees.
The Hidden Costs of Renting IT Hardware
Some IT providers bundle hardware like network firewalls, switches, and wireless access points into their service agreements, offering them as part of a monthly subscription. While this may seem like a hassle-free solution, it often leads to:
- Excessive Costs: Renting IT hardware over a two- or three-year period can cost you two to five times the upfront price of purchasing the equipment. For example, hardware that costs $5,000 upfront may end up costing $15,000–$30,000 when rented over a multi-year agreement.
- Vendor Dependency: When hardware is owned by your IT provider, it can create complications if you decide to switch providers. In some cases, providers may even remove or disable their equipment, leaving you scrambling to replace it.
- Lock-In Contracts: Providers that rent hardware often require long-term contracts, locking you into a two-, three-, or even five-year commitment. This lack of flexibility can be a major obstacle if your needs change or the relationship with your provider doesn’t work out.
Why Owning Your IT Hardware Makes Sense
By owning your IT hardware, your firm can avoid unnecessary expenses, maintain flexibility, and retain control over its technology infrastructure. Here are the key benefits:
- Cost Savings: Purchasing hardware outright is almost always cheaper than renting it. For example, a one-time cost of $5,000 for a network firewall, switch, and wireless access point with a three-year subscription is far less than paying for bundled hardware over a multi-year period.
- Greater Independence: Owning your equipment ensures you’re not tied to a specific IT provider. If you need to switch providers, you won’t have to worry about losing access to your hardware or dealing with service disruptions.
- Long-Term Flexibility: When you own your IT hardware, you can upgrade it on your terms and choose the best equipment for your needs. You’re not locked into a specific vendor’s tech stack or timeline.
- Full Transparency: Buying your hardware provides clarity on costs. Instead of bundled agreements where service and hardware costs are combined, you’ll know exactly what you’re paying for.
Best Practices for RIAs and Financial Advisors
If you’re considering upgrading your IT infrastructure or starting a new provider relationship, keep these best practices in mind:
- Ask for Transparency: Request a breakdown of hardware and service costs if your provider offers a bundled package. This can help you identify how much you’re paying for the hardware versus the management and maintenance services.
- Purchase Instead of Rent: Insist on purchasing the recommended hardware yourself. Work with your IT provider to ensure the equipment is compatible with their systems and meets your needs.
- Plan for Upgrades: Network equipment typically lasts three to five years. By purchasing hardware with a three-year subscription for software and security updates, you’ll be covered for the lifecycle of the equipment.
- Focus on Value-Added Services: The real value of an IT provider is in managing, monitoring, and maintaining your infrastructure—not reselling or marking up hardware.
The Bottom Line
For RIAs, owning your IT hardware is not just a cost-saving measure—it’s a way to maintain control, flexibility, and independence. Renting hardware may seem convenient in the short term, but the long-term financial and operational drawbacks far outweigh the perceived benefits.
Want to learn more about how to optimize your IT infrastructure? Listen to RIA Tech Talk Podcast Episode 18: Why Owning Your IT Hardware Could Save Your RIA Money