When companies are facing a tough economic climate, one of the biggest debates is about renting IT equipment over purchasing new equipment.
While a strong case can be made for both sides of the debate, renting IT equipment offers advantages to companies versus purchasing new equipment.
Manage your spending
With the world becoming increasingly digitized, in the wake of the 4IR, many companies are looking at ways to digitize their businesses to cater to the behaviour of modern consumers.
An article by techvera.com points out that the average small company spends 6.9% of its revenue on IT. Mid-sized companies spend 4.1% of their revenue on their IT budgets while larger companies spend an average of 3.2% of their revenue on IT budgets.
However, budgets are under pressure as cost-cutting measures often take precedence over increased budget allocations.
So how do companies get the most out of the budget that they have allocated for IT? First, there needs to be a separation between what is going to be spent initially and what is going to be spent throughout the year. What does that mean? Initial spending relates to acquiring new hardware while rolled out spending is generally ringfenced for software upgrades and emergency hardware purchases and replacements.
Once this has been established, companies will find that rentals are a far better option than new purchases. Rentals are generally more affordable than purchasing new equipment with savings that can be realised from 30 – 50%. A company may be able to rent 3 or 4 laptops for the price of purchasing one laptop with the software licences, security licences etc.
Renting IT equipment allows you to manage and control your IT budget.
Costs can be rolled out over the length of the rental agreement
Let’s say a company has R1 million to spend on their IT budget.
If the company opts to purchase new equipment, this budget either needs to be spent up front using existing cash flow or the business needs to take out a loan.
With rentals, this budget can be spread across the whole rental term. This means that companies don’t have to worry about the upfront capital cost and the cash flow that would have been required to purchase the equipment, can be used for other business functions.
Deployment can be managed
One of the biggest expenses associated with the purchasing of IT equipment is deployment and installation.
When purchasing equipment, companies will be expected to pay for the deployment (equipment training) and installation at the point of purchase. When renting equipment this cost can often be built into a budget and can be paid off in instalments over a number of months.
There is another element to this. Deployment comes with significant downtime. Installing software onto laptops and PCs (with their relevant user licences) takes time. Rental companies offer an option to provide you with equipment that has user licences pre-installed onto the machines. All an employee needs to do is then focus on their job and not installing software onto a machine. It is also always better to let the experts roll this out than employees who may only have very basic tech skills.
Upgrades and services become easier
The other advantage of renting over purchasing is that it is possible to include upgrades into a rental agreement.
When renting equipment, companies are often able to negotiate service and repair agreements that can be rolled out periodically over the length of the rental agreement.
There is an added advantage to this. If a new piece of equipment breaks down, and it doesn’t come with a service plan, companies will need to call in a technician that has never worked on the equipment before to fix it.
This can also cost money as no two repair places are the same. The benefits of rentals are that the price of servicing equipment can be agreed to upfront. Further, when a piece of equipment needs to be serviced, the rental company can assign a technician who has worked on the machine before to oversee the service.
Contracts are becoming customisable
One of the criticisms of rental agreements over purchasing new equipment is that companies will need to sign restrictive contracts and exiting these contracts early would come with a cost. Humans are generally reluctant to beg locked into a contract.
The truth is that contracts are not the death sentence they used to be. Companies typically include a lot of options into contracts to make their clients feel more comfortable about what they are committing to. Not only is the length of these contracts negotiable to suit a company’s specific needs, but they can also include elements such as service agreements, software upgrades, a IT system health check as well as reports on how the equipment is used.
None of this was possible in the past.