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Is IT really on lease?

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DQW Bureau
New Update





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Imagine a scenario where you have the option of choosing a rental solution

from leading car maker Ford Motors to meet your traveling requirements. The

company gives you the option of driving a Ford Icon on rent for a given period

of time and then exchange it for a Ford Endeavor on grounds such as technology

becoming obsolete. Wouldn't that be a good enough offer for you to grab?

The above logic can also be applied to IT hardware/infrastructure/solutions.

Given that technology has a short life cycle and keeps evolving, many customers

love it when such a value proposition is offered to them. If a customer had the

option of availing the benefits of the latest technology at an affordable price

for a time period set aside by him, then he will not mind taking up the offer.

On the other hand, the onset of the slowdown has forced many a cash rich company

to look at their rent model for achieving their business goals. This is exactly

why solution providers (SPs) and system integrators (SIs) can also look at

venturing into the space of holistic and piecemeal rental solutions.

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Scope for the business



Rental solutions is one business that has been evolving in India for many

years now. Amit Vira, Director, ITISL said, “The rental model of business has

evolved over a period of 15 years and has taken off in a big way. The model is

viable for those customers who look for the best-in-class solutions for

short-term projects and those who do not wish to buy them permanently.”

While rich enterprises in India, opt for rental solutions to meet their

business needs, there are certain other companies who opt for the rental model

as well. Initially, customers only wanted to avail computers on rent but with

the advancement in technology and the affordability factor, customers' demand

for desktops has been replaced by laptops. Laser printers have also replaced dot

matrix printers.

Bengaluru-based Digital Waves is an SP that has recently forayed into the IT

leasing space. Digital Waves offers two rental options-short term and long term.

While short-term is for those companies that look to fulfill requirements around

projects for upto two to three months; long-term leasing options include

pay-as-you-use and end-term option where in at the end of the contract, the

client can purchase the equipment at a fair market valuation.

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Why rental?



Both the customer and the SP stand to enjoy certain advantages once they

explore this business model.

Customers can convert capital costs into operating ones and need not bother

about long-term investment. “Assets are highly tangible and therefore, customers

need not worry about the product becoming obsolete,” pointed out Vira.

Gautam Munish, Country Manager, Cisco Capital said that technology has a

weird life-cycle-it becomes cheaper and better as time goes by. “A Pentium 4

that was available at Rs 60,000 a while ago, is now available at one third of

its cost,” he opined.

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Revenue generation is the direct benefit that an SP can count on if he/she

considers adding rental offerings to the portfolio. For example, if you have

rented a laptop which cots Rs 50,000 at 18 percent monthly interest for a period

of two months, then the interest earned by the SP Rs 18,000. The same laptop can

now be extended to a different customer at yet another rate of interest fixed by

the SP.

Vendor leases



The SPs who do not wish to consider rental solutions as a stand alone model

and look at offering it as a piecemeal solution to their customers, could

consider collaborating with vendors to cater to their (customer's) requirements.

“The rental solutions that we have on offer are all structured around

operating lease, which help us write aggressive residual solutions, keeping the

best of technologies in mind. Hence, it is a win-win situation for all.

Initially we had to sell the concept and increase awareness among customers.

Now, the market demands do not seem to cease. The slowdown has further

aggravated it and now companies want to optimally use the cash to get maximum

returns,”added Munish.

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At times, the SP's finances are limited. Hence, vendors like Cisco extend

their support to partners by funding the entire project. “We look at the entire

network infrastructure and if there are some non-competing and non-Cisco keys,

that also impart functionality to the entire project then Cisco funds it,”

stated Munish.

Munish further elaborated that the partner stands to gain ease of credit

deliveries, ensuring benefits, matching inflows to outflows and achieving break

even points. Therefore, partners will start getting revenues while working on

projects.

Pooja Sharma


poojas@cybermedia.co.in

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