Forging ahead with leasing: Rethinking IT investment practices
COVID-19 forced many businesses to adapt their work processes to accommodate remote work. Most invested in digital technologies such as mobile hardware, software, or digital infrastructure. Technology trends that were already under way at the start of the coronavirus outbreak were sharply accelerated.
Gartner forecasts worldwide IT spending will exceed $4 trillion in 2022. This is roughly 10 times the entire GDP of South Africa.
Global spending growth on devices reached a peak in 2021 (15.1%) as remote work, telehealth and remote learning took hold, but Gartner expects 2022 will still show an uptick in enterprises that upgrade devices and/or invest in multiple devices to thrive in a hybrid work setting.
To support this report is the IDC’s Worldwide Quarterly Computing Device Tracker that analyses the market of PCs, including desktops, notebooks and workstations. It found the pandemic caused a significant amount of demand for devices, despite component shortages and ongoing supply issues.
However, the global chip shortage is pushing up prices of information and communications technology (ICT) equipment such as laptops, phones and data storage equipment. Chip-makers are passing on the higher costs, which they had to pay, to PC-makers and gadget firms. Industry officials say price increases may continue until 2023.
Driven by cost-efficiency and the necessity to acquire ICT equipment such as computers, which are now highly priced, a trend that has emerged out of the pandemic is replacing traditional technology spending practices and capital allocation with leasing.
According to the 2013-2028 Report on global IT leasing and financing market by player, region, type, application, and sales channel report, the IT leasing and financing market is anticipated to achieve significant revenue share by 2028. Increasing budget flexibility and equipment decommissioning or disposal services will drive overall industry growth in the forecast period.
This upswing in the number of businesses leasing ICT equipment instead of purchasing it, is due to the financial benefits of leasing, and to computers and other tech products becoming obsolete and outdated at a faster rate than ever before, which is contributing to our growing e-waste problem, says Zakhe Khuzwayo, CFO of InnoVent, whose services include leasing of ICT equipment such as desktops, laptops, printers, servers, etc.
“A technology refresh to equip staff and offices with computers, printers and other devices necessary for your day-to-day business operations can break the bank and in two to three years, you will have to do it all over again or spend time upgrading ageing systems. Factor in end of life. What happens to the outdated equipment? For most, it’s hauled away somewhere in stock rooms or worse, sent to landfills or incinerated, which releases materials such as lead, mercury, or cadmium into the soil, groundwater and atmosphere, thus having a negative impact on the environment. ”
But when you opt to lease the equipment instead, the large initial cash outlay required upfront with an outright purchase, can be spread out during the leasing term, freeing up cash flow to be used on other things instead, such as cyber security, marketing, investing in core business activities or appreciating assets, Khuzwayo suggests.
“When you have a leasing company like InnoVent, who offer subsidised finance, you can have the latest technology on site at a fraction of the cost, without having to pay the full purchase price or worry about obsolescence,” he says.
Khuzwayo concludes with yet another perk of leasing – supporting the growth of the circular economy. “Allowing clients to access the equipment they need to run their business, rather than owning it outright, the leasing business model is a complete lifecycle approach. It starts with a first life stage and a second life when assets enter a refurbishment programme for second use, extending the life of product to keep them in circulation for longer so it doesn’t end up in a landfill.”