Analysis of Acquisition of New Hardware

Acquisition of every new hardware product is an investment project. And as such, it must create the maximum amount of financial value and have its KPI – payback period, NPV, IRR/MIRR and economic profit acceptable to your finance department. For them, acquisition of a hardware item is just another investment project. Fundamentally no different from any other.

A hardware item (like any other object) creates financial value by doing one or more of IRACDR – Increase Revenue; Avoid Cost; Decrease Risks. And/or reduce the necessary investment in working capital. This comes directly from DCF (Discounted Cash Flows) model for calculating financial value.

In modern hardware systems, no item is an island, but an integral and vital part of your coverall hardware system. Therefore, it will be more accurate to say that acquisition and deployment of a new hardware item allows the whole system to do IRACDR. Or reduce the needs for working capital. You can find more information about the working capital in Financial KPI section of this guide. 

Therefore, your new item must be an excellent fit for your overall hardware system.

Speaking of acquisitions. We live in a very fast-paced world; but computer hardware changes (and improves!) even faster. Therefore, to stay competitive (and a top-notch hardware system can be a very powerful competitive advantage), you will need to keep your system up-to-date.

Which will require development and implementation of a highly efficient corporate process of upgrading existing equipment and acquisition of a new one – as the addition to or replacement of the existing one. Development of requirements and requests for proposals, selecting the right equipment type, the right product, vendor and actual supplier (distributor, dealer, systems integrator), acquisition terms (purchase vs, leasing), financing, service and support, etc.   

Obviously, before making an acquisition of a hardware item, you must develop a comprehensive financial and operational plan for this investment project. Supported by all relevant corporate documentation.