Leasing and Financing Are Important IT Tools, Says IDC

Published: October 2, 2007

by Timothy Prickett Morgan

Whether or not the budget money is your own or you are spending it on behalf of your company for its benefit, it is often wiser to seek outside financing or lease a capital asset than to sink precious funds into acquiring it directly. This is exactly what IT procurement professionals confirmed when they were interviewed by IDC to reckon the affect of leasing and financing on their IT purchasing decisions.

In putting together a recent report, entitled 2007 IT Leasing and Financing End-User Survey: Customer Needs and Wants, IDC interviewed 206 IT shops about their opinions on how the availability of leasing and financing affect what IT wares they buy. The IDC report says that leasing and financing are "a critical factor," and the report goes on to say that IT managers are sophisticated in their knowledge of how leasing and financing gives them operational, financial, and strategic flexibility. Of those surveyed for the report, 75 percent said that protection from obsolescence, the ability to move costs from the capital side of the budget to the operational side, and the need to do larger purchases driven by larger amounts of capital are the main reasons they like leasing and financing options when it comes to IT products.

Companies surveyed also told IDC that they wanted better customer service from the financial arms of their IT suppliers, saying that sales, billing, customer service, and end of lease procedures all needed to be improved.

"Customers' wants and needs and providers' principle business objectives are in alignment," says Joseph Pucciarelli, research director, IDC's technology financing strategies service. "Customers want flexibility and choice in software and services financing while providers want business growth. The missing ingredient? Innovation and investment in financing products that offer greater value to customers."

The big IT lessors, like Comdisco and El Camino Resources in the United States and Europe Computer Systems in Europe, are long-since dead and gone. Even with the expansion of the IT business and the small portion of it that is represented by servers and storage, the rapid depreciation of such gear has made it difficult for lessors to give the kind of service and get the economic returns from that service that they could provide 15 and 20 years ago. Moreover, relatively lower interest rates and a weak dollar have not helped their cause, either.

Having said that, investing in a rack of energy efficient servers or a mainframe complex might start looking a lot more attractive than a portfolio of subprime mortgages did just a year ago. Businesses pay their bills, and they want to use IT to drive their revenues up and to the right on the charts. If interest rates go a little higher, the economy gets a little wobblier, and companies want to hold onto their cash a little tighter, leasing and financing of IT gear could see a resurgence.

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