Leasing Professionals

Jyoti Lalchandani argues the case for leasing in the wake of the seismic shift in technology

Lalchandani jyoti

I’ve spoken numerous times over the past 12–18 months about the major transformation that is currently underway in the IT industry, not just here in the Middle East, but all around the world.

The so-called ‘third platform’ — made up of cloud, mobility, Big Data, and social media — embodies a fundamental shift in underlying technology and is transforming how individuals and companies communicate, collaborate, and apply technology to their daily tasks.

Indeed, it is no exaggeration to say that the seismic shift we are witnessing today is similar to that first experienced with the introduction of the personal computer.

The repercussions are being felt in every crevice of the IT industry, and perhaps nowhere more so than in the IT leasing and financing space. The widespread adoption of third platform technologies has already begun to alter this particular landscape, with cloud and mobility actively disrupting the traditional equipment segments that represent the lion’s share of financed IT.

As a consequence, providers are diversifying beyond their traditional equipment offerings, with software and services becoming a bigger part of the overall leasing and finance package. But what are the key motivations driving growing numbers of IT buyers to embrace this new approach? And what factors must they consider before introducing leasing and financing as an integral part of their fiscal plans?

Ultimate appeal

We all know that the ultimate appeal of cloud computing for end users centers around the faster deployment of new applications, improved return on investment, and cost savings in relation to equipment, software, power, and cooling.

And given these motivations, it is clear that the next generation of IT investment models will need to adapt to evolving business needs, with customers demanding the flexibility to acquire, use, and pay for IT in a way that best meets their particular business requirements.

One area that is currently attracting the wolf whistles of enterprise IT buyers is integrated infrastructure and platforms. These systems are designed to be deployed quickly, using a modular approach that enables the buyer to scale up resources and workloads quickly.

Sounds perfect, doesn’t it?

Well, don’t get too carried away because the high initial capital outlays associated with these systems are inducing nightmares in even the soundest of CFO sleepers. So in a bid to escape the wrath of the bean counters, a growing number of IT heads are seeking out leasing providers for nuanced financing options that will enable them to better match their expenses with the business value of these integrated solutions.

This is just one example of the growing pressure that organizations across the region are coming under to embrace new IT platforms, and leasing offers a viable approach to overcoming some of the financial obstacles they will inevitably encounter along the way. Regardless of the vertical in question, it can sometimes be impossible to know how much capacity will ultimately be needed when ramping up for a new project.

In such cases, I would encourage IT buyers to at least consider the leasing and financing option as a way of accommodating their changing future needs. It is also an approach I would recommend for companies looking to implement private cloud installations while avoiding the large upfront startup and infrastructure costs that typically accompany them.

The OPEX vs. CAPEX argument is a now-familiar driver of organizations along the leasing route, and once this path has been trodden it is obvious that customers value the flexibility of such contracts above all other elements.

The future direction

Buyers are not prepared or required to wait until a lease is up for renewal; they can make changes during the contracted period, and this is a critical factor in the perceived success of leasing engagements. For businesses and IT leaders that are unsure of the future direction of their datacenters, leasing and financing provides a much-needed assurance that they are not locked into a long-term commitment.

Another key motivation that IT buyers are relaying to me is the fact that leasing and financing provide protection against product obsolescence, as the providers remove old equipment at the end of the term and offer full life-cycle support along the way. And in a bid to simplify the budget planning and management challenges faced by their customers, many leasing and financing suppliers are now providing consolidated monthly invoices that include hardware, software, and services; in an uncertain technology and financial environment, this alignment of budget with expenses is critical and clearly attractive to end-user organizations.

This happy marriage between the interests of the CIO and CFO is a common theme in my discussions around leasing and financing. Ultimately, both of them want to embrace a more agile approach to managing their organization’s datacenter capabilities. Flexibility and simplicity are key to achieving this, and cloud represents a clear opportunity to adopt a financing solution that ticks all the necessary boxes.

In short, if your organization is looking to adjust capacity on demand, guard against obsolescence, align costs with budgets, decrease its dependency on existing datacenters, or preserve capital for unforeseen projects, then the answer might not only be sitting up in the clouds, but also in the hands of the leasing and financing providers that are increasingly shaping the IT procurement landscape.

Jyoti Lalchandani is group vice-president and regional managing director for the Middle East, Africa, and Turkey at global ICT market intelligence and advisory firm International Data Corporation (IDC). www.idc-cema.com . This article also appeared in Gulf News