Tuesday, 5 June 2007

Trends in the IT equipment leasing market

Interesting lessons can be drawn from the trends in the IT equipment leasing market.

IDC says here that the worldwide IT leasing and financing market exceeded $70 billion worldwide in 2006, and that it will pass the $100 billion mark by 2010. All this while shifting from IT equipment to software and services.

At the same time, AMI Partners is saying in this study that small and medium businesses in Germany alone are increasing their IT infrastructure spend by 5% to $37.7 billion in 2007. Equally, the say here that in China companies only (!) will be spending over $28 billion in IT for the same period.

If these numbers are right, then Germany and China together will spend almost 80% of what the entire World will lease or finance. And this, excluding the fact that the $70 billion mentioned by IDC include software AND services. I don't know how AMI Partners compiled their numbers, though. But that is rather irrelevant here.-

What I adventure to conclude from the above is:

  • while leasing and financing are growing fast, it seems that they are only covering a fraction of the potential market
  • leasing and financing of IT equipment is giving way to leasing and financing of software and services, yet not to the detriment of the latter: companies are adding software and services to their leases
But that, I am afraid, is not the full story.

From my own experience, I see smaller leasing companies, like Infibail, who traditionally served big accounts and small accounts alike, shifting towards the SME segments alone.

This can have many reasons. The two most convincing that I know are:
  • I guess large enterprises have found out (the hard way) that leasing IT equipment requires good IT asset management and that given the sheer quantities of equipment that they constantly turn over, it is quite difficult to be efficient at it. In other words, it is expensive to lease if you cannot manage the contract start and end phases correctly. Are they now buying the material?
  • SMEs are becoming more computerised and they represent a very large market (this seems to be partly confirmed by the number given by AMI)
Putting all the above together, everything seems to fit, somehow. But still, this is a superficial assessment. Yet, IDC seems to be betting on "systems management and virtualization software" at the root of the shift. This may be part of it, but not the most important, if you ask me. Of course, we all know that these studies are paid for by someone, so that may distort things a bit.

And again, I may be making the wrong assessment.