leasing vs. buying

Continuing the thread from http://www.directadmin.com/forum/showthread.php?t=30096

jlasman said:

Floyd, as you probably know, in the U.S. in a true software lease, the entire amount is expensed. So therefore, while you don't get your money back you do get the entire amount of the software expensed against your income before taxes.

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Which is exactly what I am saying.

For arguments sake let's say your tax bracket is 30%. That means after all your deductions you have to pay 30% of you taxable income to the government.

Say you pay $300 in a year for a software lease. You can deduct that $300 from your taxable income. So by deducting that $300 from your taxable income you don't pay the government $90 that you would normally have to pay. Your net expense for the software for the year is $210. Assuming everything stays the same it will cost you $210 every year. If you lease the software for 5 years that means that license will have cost you $1050 in 5 years.

Say you pay $300 for a lifetime license. You can deduct $150 from your taxable income. So by deducting $150 from your taxable income you don't pay the government $45 that you would normally have to pay. Your net expense for the software is $255. After 5 years the license will have cost you $255.

So in the above example if you only plan on using a piece of software that cost $300 for one year then yes leasing is the way to go since $210 is less that $255. If you plan on using it for more than one year buying a lifetime license is the way to go.

For some reason tax deductions are confusing to people. Many believe that a $300 tax deduction means that is $300 less that they have to pay the government. Not true. It means you don't have to pay taxes on the $300 which generally be anywhere from 25% - 50% or even more. So the amount you don't have to pay the government is some percentage of the deduction. A tax deduction means you can subtract it from your taxable income. It does not mean you can subtract it from you the taxes you have to pay.

I realize other countries have different tax laws. Even if you did deduct 100% of the money right off the bottom line of your taxes it is still money you do not have in your pocket. Whether you paid it to the software company or to the government its still money you do not have in your pocket.

Unless there is some weird tax law somewhere where the government is paying you to lease software buying software will always save you money in the long run rather than leasing. How long depends on the different price options. And it may takes years to pay for itself.

I must say, I agree with Floyd on this one. I followed this from the other thread. Why one would continue to lease when obviously the expenses continue to accrue year after year, vs a lifetime license where you simply pay it and be done with it?

Side note: If DA flops, you've still got your software. If you're only leasing, you're SOL.

This is basic math, regardless of tax law. Unless there is some country on Fantasy island that pays you full out or above and beyond the purchase price...

IMcomGuy said:

Side note: If DA flops, you've still got your software. If you're only leasing, you're SOL.

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Not really; the system still checks the licensing servers; for example you're not allowed to run it on multiple IP#s, so the check is required.

And then of course there's the issue that a lifetime license doesn't include support, while a leased license does. Until we made other support arrangements with DirectAdmin we always maintained one leased license so we could ask questions .

Not really; the system still checks the licensing servers; for example you're not allowed to run it on multiple IP#s, so the check is required.

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Then a lifetime license is not really a lifetime license. The "lifetime" should be as long as I want to use it not as long as DA is in business. Its not supposed to be the lifetime of the DA business. So something needs to change here if this is true.

From DirectAdmin staff in June 2005:

A lifetime license would keep working forever, even if we
went out of business today. A monthly license would
probably stop working within 30-45 days.. so if we did go
out of business, the nice thing to do would be send out a
lifetime license to everyone's system.

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If that is not true then I need to know now.

floyd said:

If that is not true then I need to know now.

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It would seem that the word from staff is at odds with the word from Jeff. Surely one of them has the real tablets from The Mount.

Should be a simple matter, and good business practice for the folks that
sell DA to tell us 'zactly what is a life-time license.

How could a lifetime license work even if DA went out of business, if DA
checks to see that the license is only used on one IP?

Thom

I may be mistaken, but I believe the licenses include the IP address encrypted in the license.key file. I do not believe it is necessary for the DA to "phone home" to check on the license. It simply checks your assigned IP addresses against your license file, and determine it that way.

I had an issue one time where a reboot reset my IP address to a different (older) IP for some reason. DA wouldn't start because the IP was invalid.

Percy said:

I may be mistaken, but I believe the licenses include the IP address encrypted in the license.key file. I do not believe it is necessary for the DA to "phone home" to check on the license. It simply checks your assigned IP addresses against your license file, and determine it

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So, if the DA folks go out of business, and one has to get another IP address, then either the leased or lifetime licenses would appear to be as useful as a cement fish.

One would hope the key generator is in some software escrow situation.

Thom

If my assumptions are correct, then yes. Moving to a new IP would make your license useless.

Percy said:

I may be mistaken, but I believe the licenses include the IP address encrypted in the license.key file. I do not believe it is necessary for the DA to "phone home" to check on the license. It simply checks your assigned IP addresses against your license file, and determine it that way.

I had an issue one time where a reboot reset my IP address to a different (older) IP for some reason. DA wouldn't start because the IP was invalid.

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But all you have to do is alias the DA ip to the network interface such as eth0:4 and change the device in the directadmin.conf file and it will still work. The DA ip does not have to be the main ip and if the DA ip is not on the same network then it won't do any harm either. The ip will not work but DA will. You won't be able to get any updates though because DA will try to get the update through the DA ip which in this case is on eth0:4 which doesn't work. However DA will still operate.

Hello,

Firstly, we have no plans on ever going out of business

However, if for whatever reason there was no licensing server, a lifetime license would continue to chug along forever, happily (until 2038, when computer time ends, but we'll be addressing that before then, I would assume). A leased license would only go until it's expiry. If there was no licensing server, a new license with new IP address couldn't be downloaded. However, whatever you chose to do on your server and it's network settings would be up to you

John

I have a question...
Right now Im on a monthly license. I am going to buy a lifetime license (well about 90% sure).

I noticed someone mentioned that there is no support on a lifetime licesnse. What exactly does that mean? What kind of support do we get with the monthly license (besides the installation when you order)?

What are the advantages to each?

You get 90 days of support for a lifetime, and unlimited support for monthly licenses during the time period the license is active.

"Support" would be defined as any issues relating to DA or it's services such that, if they're not working as they should as per the default install, we can asssit in getting them working to their default state (assuming the basic system requirements are met for that install). Things that are not covered by our support would be customizations, basic admin tasks such as maintaining basic operations/updates of the server (we're not your server admin), low level library updates, setting up user scripts, etc.. Basically, we only cover things that we could have prevented which are directly related to DA and it's services, meaning things like if the installer isn't working right, we'll fix it. Say you're having trouble installing your own php scripts, this would not be covered. We take most requests on a case-by-case basis, but those are the rough guidelines we follow. Regarding updates, it's the server admin's job to do them, but if there are compile issues with our scripts, then you can ask for help. We're more flexible with DA issues itself, so if you've hit a bug with DA, or it just won't start up, you can uaully email us with those types of things regardless of your coverage, within reason. We're reasonable people and won't usually leave you hanging

We recommend monthly licenses for the purpose that, updates will be never ending, so at some point, you may run into problems and will require our help. But I'm probably biased in that answer, and everyone's needs will be different, so it's up to you. A lifetime is generally for long term cost savings, on the assumption that you're more comfortable debugging potential issues on your own.

John

John,
Thanks for the good info! I am assuming that updates to DA itself are included in the lifetime license.

But, what if a problem arises later on during a DA upgrade? say, 1 year into a Lifetime license, DA releases am upgrade, and there was some issues during the upgrade...would I be on my own to resolve the issue?

Also, once the support period is up, is there an option to "purchase" support on a case-by-case basis? or how about a lowe priced monthly "support only" plan?

BooDaddy said:

John,
Thanks for the good info! I am assuming that updates to DA itself are included in the lifetime license.

But, what if a problem arises later on during a DA upgrade? say, 1 year into a Lifetime license, DA releases am upgrade, and there was some issues during the upgrade...would I be on my own to resolve the issue?

Also, once the support period is up, is there an option to "purchase" support on a case-by-case basis? or how about a lowe priced monthly "support only" plan?

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Speaking unofficially - here's my 2cents.

Directadmin updates all the time, just use the license update utility, it'll download and install automatically - since August 2003 it's never failed after dozens of updates. Now, the server operating system and general components that aren't managed by the GUI control panel are a different story - those are your, or your support companies responsibility.

As for purchasing support after the 90 days, John would have to address that.

Thanks for all the input. It looks like we will be able to properly support our DirectAdmin install using these helpful forums!

After using DA for a while, we havent had ANY issues so far. It runs excellent, and i love the "lighweightness" ! We are going to purchase a lifetime license, but are going to wait until so that we can expense it on next quarters books. Until then, we are loving the monthly license.