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Cutting IT equipment costs – solution for CIOs under pressure

Johannesburg, 24 May 2023
Zakhe Khuzwayo, co-founder and CFO, InnoVent.
Zakhe Khuzwayo, co-founder and CFO, InnoVent.

A simple switch from buying IT assets to leasing them could cut up to 30% off the cost of IT equipment – an important saving in an increasingly difficult economic climate.

This is according to Zakhe Khuzwayo, co-founder and CFO of InnoVent, which positions itself as a leading specialist IT leasing firm.

“CIOs and CFOs are under pressure to cut costs, but at the same time, they need modern equipment to drive productivity, progress and transformation. The answer is to equip staff with leased IT equipment,” he says.

A recent SoftwareOne survey: “CIO Pulse: 2023 budgets & priorities” found that 83% of CIOs in the UK and US are under pressure to stretch their budgets further, while 92% are also expected to deliver revenue-generating digital transformation this year. Global CFOs are similarly focused on cash management, according to research by McKinsey and In South Africa, CFOs and CIOs are under even greater pressure, thanks to load-shedding, a weakening rand and threats of further interest rate hikes.

Khuzwayo says: “As a CFO myself, I understand the pressure when budgets are stretched and every division has a strong case for their budget. When it comes to IT, you can’t stop business, you need to progress, and you can’t run a future-proof business on legacy equipment. But now is not the best time to use limited capital to buy new laptops, desktops and servers.”

He notes: “The rand-dollar exchange is unpredictable, so paying cash may not work in your favour right now. The interest rate keeps rising, so paying for equipment with a bank loan may cost more than you budgeted. However, when you lease or rent the equipment, there is no upfront capex. You pay a fixed rate for it over three or four years, spreading that value over the lifetime of the asset and in line with your scheduled refresh cycle. With leasing, you don’t have to worry about delayed upgrades, and with us, it is also subsidised with an upfront buyback value, to lower the cost of financing.”

Khuzwayo explains that reputable leasing firms can save clients a significant percentage of their equipment costs. “We offer savings that could go as high as 30%, depending on the type of equipment and the client’s risk profile. This option is, therefore, cheaper than traditional forms of finance and ensures you can support productivity while also cutting costs.”

He adds that many South African businesses still fail to understand the benefits of leasing: “Elsewhere in the world, most companies lease their IT equipment, but local businesses are sleeping on the opportunity. As with other assets, you should only own things that appreciate in value. It makes no sense to own things that lose value each time they are switched on – such as laptops. Leasing saves money; it’s essentially offering the use of the equipment while it is still in its optimal state with a built-in upgrade strategy to keep equipment up to date.”