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Why leasing? Tips for continuity when times are tough

Johannesburg, 31 Mar 2023
Zakhe Khuzwayo, co-founder and CFO, InnoVent.
Zakhe Khuzwayo, co-founder and CFO, InnoVent.

Cashflow – available cash to cover short-term obligations – has never been more important for businesses, particularly as inflation and interest rates rise and the unexpected becomes the norm. Leasing equipment goes a long way towards alleviating working capital shortfalls and providing a buffer against unexpected expenses, says Zakhe Khuzwayo, co-founder and CFO of InnoVent.

InnoVent, an IT leasing firm, is seeing growing interest in its IT asset leasing, asset management and asset refresh services as organisations reconsider their spending patterns and look to reduce the total cost of ownership of IT assets.

Khuzwayo notes that while global IT spending is increasing overall, Gartner reports that spending on IT devices such as laptops and PCs is down.

“Many organisations have concluded that investing capital in new business equipment every two to three years is no longer sustainable. However, their response to belt-tightening efforts has been to sweat IT assets for longer than they should. This is counter-productive since it reduces IT spend at the cost of productivity and business continuity,” he says.

“Holding onto legacy equipment to preserve cash is a band-aid solution. Since laptops and computers were not built to last five to 10 years, and technologies improve all the time, maintaining old technology hampers business operations,” he says.

Khuzwayo says legacy devices depreciate in value and slow business down in a number of ways: they become unreliable and slower, hampering processes and presenting the risk of downtime. Older hardware may be unable to run the latest applications. Older laptops can also present cyber security risks through non-supported operating systems and unpatched vulnerabilities.

In addition, the batteries on older laptops tend to perform poorly over time, putting remote and home-based workforces at risk of downtime and frustration during load-shedding. “In many older laptops, battery life is non-existent and they must remain plugged in. If remote employees don’t have backup power to support work during load-shedding, the business has to sacrifice two to four hours of productivity each day, or reassess their hybrid work models,” he says.

“IT equipment is critical for business continuity, and holding onto old, unreliable technology puts continuity at risk. Legacy systems require extensive upkeep and the costs of keeping them running are lofty – far more expensive than it would cost to simply overhaul your hardware” Khuzwayo says.

Leasing new IT equipment puts the latest devices into the hands of the workforce without the organisation having to pay the full purchase price upfront or incur debt to buy it. “Our approach at InnoVent gives organisations new IT equipment, below the prime cost of financing it, so it compares very favourably to traditional forms of finance,” he notes.

“In the leasing arrangement, capital outlay is not required upfront. Organisations pay for the use of new equipment over the duration of the contract, effectively managing cash flow. At the end of the lease, the used technology is collected and the organisation can move to a new technology refresh cycle. The used equipment will then be refurbished and redeployed, contributing to circular economy goals.”