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CATI systems: Should you lease or buy?



Article ID:
19980507
Published:
May 1998
Author:
Henry A. Copeland

Article Abstract

There are a wide variety of computer-assisted telephone interviewing (CATI) systems available today. This article discusses CATI systems and issues for consideration when determining whether to lease or buy such a system.

Editor’s note: Henry Copeland is president of PTT Systems, Inc., North American agents for Pulse Train Technology, Ltd., a maker of research software and products.

There are a wide variety of computer-assisted telephone interviewing (CATI) systems available today to companies who use telephone interviewing to conduct market research. There are also many differences in the features, capabilities and costs of CATI systems, and it is often difficult to define the appropriate criteria to base a decision on.

The first priority should be to select the CATI system which is best for your company based on your company’s specific needs and the features, capabilities and software support offered by the systems you evaluate. Once you’ve made a decision on the system that is best for your company, you may then be faced with a lease-or-buy option.

The purpose of this article is not to help decide which CATI system is best for your needs, but to provide a basis for deciding whether the system you choose should be purchased or leased once the CATI software decision is made. Of course, you may not have to decide whether to lease or buy: Some CATI system are available only on a lease basis, some systems can only be purchased for a one-time price, but others can be obtained either way.

The simplistic view of leasing versus buying is that a one-time purchase price should be cheaper in the long run versus paying a monthly lease price for an indefinite period of time, if only because a single purchase price puts a ceiling on the amount of money you will pay to the software company, while a lease is open-ended. But there are many considerations in the lease- versus-buy decision that aren’t obvious at first glance.

Here are some questions to ask yourself considering whether to lease or buy CATI software:

  • How much does the software package cost?

    If the price is small, why bother leasing? On the other hand, for a very expensive package, leasing may be the only affordable option.

  • Does the purchase price include support and upgrades?

    If yes, for how long? How much do support and upgrades cost once the initial period runs out? And once you add in the support and upgrade costs, how long does it take for the lease costs to exceed your capital outlay plus support fees? If the answer to this last question is several years, you may find it is actually cheaper to lease.

  • How likely is it you’ll want to switch to a different package if something better comes along or if the software vendor doesn’t live up to your expectations?

    If you buy the software, you own it. If it later turns out the system is not as up-to-date or is not adequate to meet your needs, you may be stuck with it. On the other hand, a good CATI lease gives you the flexibility to drop it on relatively short notice. This gives you valuable leverage over your software supplier to make sure it lives up to your expectations.

  • How important is the software package to your business?

    Is CATI interviewing your major means of collecting data or is it only an occasional activity? If the CATI package will not have a major impact on your business, you are probably better off buying; if CATI interviewing is your company’s lifeblood, you may well want the flexibility and leverage over the software company that leasing provides.

  • How important are software support, upgrades and bug fixes to your operation?

    Software leases generally include full software support, upgrades and bug fixes as part of the package. Purchase prices typically include a limited period of time for support and upgrades; after the initial period, you must pay for them. On the other hand, leases generally include free upgrades and support on a continuing basis.

  • How complex are your questionnaires, sampling plan, interviewer management and CATI scripts?

    If your scripts and sampling plans are straightforward with few complications, perhaps you don’t need the extra interest and support that come with leasing a system. If you regularly conduct complicated or highly sophisticated studies, you may find leasing to be an attractive way to ensure a responsive support effort in the years to come.

  • What role do you expect your software supplier to play in your business?

    Are you looking for a partnering role where the vendor takes an active interest in your CATI operation, or do you simply want the existing software to work as advertised? Again, if you only need the features and capabilities currently offered, a purchase price is almost certainly cheaper. Most studies today, however, are much more complex and involved than studies done five or 10 years ago. Technology has certainly played a role in this trend; and after all, software technology is what you are buying when you select a new CATI system.

  • Is your company cash-rich or looking for financing?

    Leasing your software generally requires no money down for the software while a purchase price for good software for 30, 50 or more stations can be quite high. Some companies prefer to finance the software much the same way as hardware (i.e., with an outright cash purchase, through a bank loan, or by using an outside leasing company). Most software companies don’t offer a lease with an option to buy; you must decide for yourself which is best for you.

  • If your vendor offers both a lease and a purchase price, what is the "multiple" of the purchase price compared to the monthly lease price?

    If your proposed lease payments total more than the purchase price in a very short period of time, you would be foolish to make lease payments indefinitely. On the other hand, leasing can be a very economical way to finance what would otherwise be an expensive purchase.

  • How flexible is the leasing option?

    Can you add to or reduce the number of stations you use? A purchase means just that: you buy the number of stations you need (or think you need). If you need additional stations, even for a short period of time for a single project, you must buy more stations from the software vendor. A lease arrangement may allow you to add or subtract stations as your business grows or your business needs change.

  • Is the software a mature package with few features being added each year, or is it developing on a continuous basis?

    How much do you really need the upgrades as the software evolves? It makes no sense to lease a system that isn’t evolving; you may as well buy it. On the other hand, continuous addition of new features and capabilities you can really use in your business are valuable attributes of a good leased system.

  • If you purchase the software, do you trust the software company to be responsive to your needs for support, bug fixes and upgrades after it has all your software money?

    A good software company will always be responsive to all of its clients, regardless of whether they have purchased or leased. On the other hand, it is only human nature to serve your current clients (those who pay every month) a little better than one who has already paid everything he is going to pay to the company.

    Another consideration that is not often obvious at first glance in the lease versus buy decision is how long do you expect the software company to be around? Companies that sell their software collect the entire revenue stream from your purchase in advance. Once you buy, the only additional revenues the company generates from your purchase are relatively modest continuing support charges and software additions. On the other hand, a lease gives the software company less money up front, but provides a continuing revenue stream to keep support people on the job.

    These are some of the questions you might ask before deciding whether to lease or buy. Only you can decide the best course for your company.

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    Related Glossary Terms

    Spec Writer/Programmer
    The person responsible for the programming and testing of computer aided interviews. Other responsibilities may include managing the system, sample management, quota controls and developing report structures.
    Telephone Interviewing Facility Supervisor
    The person at a telephone interviewing facility who manages individual studies They are generally responsible for briefing interviewers, monitoring interviewers and production quotas, and interacting with interviewers while study is conducted.
    Telephone Facility Manager
    The person at a telephone interviewing facility who is responsible for overall management and direction of the telephone center. Responsibilities may include fiscal management, human resources and scheduling the facility. They may have some sales responsibilities.
    Call Record Sheet
    Interviewer log which lists the number and results of a contact.
    Callback
    An attempt to reach a person who could not be reached by telephone on the first try or a follow-up or after-use interview.

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