1. Why Companies go for Long-Term
Rental instead of Outright Buying?
2. 1). CAPEX VS. OPEX (RENT
VS. BUY)
Many MNC’s have the global policy of restricted
CAPEX investments especially in emerging markets.
Hence, Indian companies should go for OPEX, i.e.,
rental mode.
- Opex Model helps to improve cash flow.
- It helps to conserve the up-front capital.
- Renting out I.T helps to save other overhead costs,
like Maintenance, Repair.
- Low initial outlay.
- Lower Total Cost of ownership.
- Buying involves lengthy budget approval process.
Leasing can shorten the process and accelerates the
implementation of the solution.
3. 2). TECHNOLOGICAL
OBSOLESCENCE
Many companies have their requirement to use state
of art technological equipments. It includes
companies involved into high end CAD/CAM
applications, Cloud Applications and Engineering
applications.
- Recent research undertaken by Siemens, which
interviewed 400 finance directors across
Germany, the UK, France and the US, showed
that the replacement period for PCs is becoming
shorter.
- Leasing eliminates equipment disposal headaches
and
provides an advantage to upgrade their equipments.
- No dead investment, in case requirement changes
due to
technological advancement.
- “Due to the speed at which technology changes,
and the burden on companies to keep up with the
4. 3). Flexibility to Scale-up/Scaledown
Many companies have situations where they require
n number of machines for certain period, 2n or 3n
number of machines for another period. Rental gives
them flexibility to scale up/scale down.
- Allows acquisitions to be driven by needs , not
budgets and caters for future change.
- At the end of the rental period, you can choose to
return
rented equipments early, keep your
equipment for longer, change it, add to it, at the end of
rental term, you have the option to renew the contract,
upgrade technology, return some or all of it.
5. 4). I.T as a Utility
There are many industry segments where I.T
Equipments are treated NOT as an asset class.
They just want to use the equipments which are
sufficient for their requirements. They do not want to
pay for technology which will not be useful in the
immediate future.
