IT Leasing on the Rise

A recent study commissioned by the Equipment Leasing and Financing Association of America ('ELFA') and produced by The Alta Group examines how U.S. businesses and other organizations acquire critical information technology ('IT') equipment and what factors influence the decision-making processes.

According to the report, IT equipment financing has grown to $40 billion per year. This is a 67% increase from just three years ago, when compared with findings in a similar 2003 IT equipment-financing study commissioned by the ELFA. In addition, IT equipment financing as a percent of total U.S. equipment financing activity nearly doubled from approximately 12% in 2002 to 22% last year.

A variety of trends affecting IT equipment leasing and finance are explored in the study. As part of the research, Alta completed interviews of senior-level executives at bank, independent, and captive equipment leasing organizations this past summer. Based on the interviews, modest growth in IT financing is expected over the next three years. Consequently, lessors should evaluate their competitive positions now to capitalize on trends identified in the study, which include:

• CFOs are paying more attention to IT equipment acquisitions. So much money is spent on IT equipment that many organizations now consider IT spending an integral part of the capital budgeting process;
• Technology changes are actually leading to longer lease terms. PC performance continues to evolve, and lease terms have actually increased. Leases for advanced servers are lengthening, as well;
• Customers are demanding total-solution financing. The bundling of hardware, software, and services is now the norm, rather than the exception, in the business;
• Captive leasing organizations are flex-ing their muscles. Captive leasing companies are growing their asset bases by significantly expanding and enhancing their sales organizations and employing other aggressive strategies;
• Independent leasing companies are being squeezed like never before. Between the aggressive pricing of captives and banks' low cost of funds, the survival of independent lessors is at a crossroads;
• More new business is coming from the reseller channel. Lease finance companies will be relying more on the channel and less on direct sales over the next several years for a variety of reasons; and
• It's harder than ever to establish and recover residual values. Distinguish-ing the differences between IT products is more difficult than ever, promp-ting the rapid commoditization of equipment ' and making it increasingly difficult for equipment leasing companies to establish and recover residual values.

The Information Technology Equipment Leasing and Financing Study can be ordered online at www.elaonline.com/store/.

A recent study commissioned by the Equipment Leasing and Financing Association of America ('ELFA') and produced by The Alta Group examines how U.S. businesses and other organizations acquire critical information technology ('IT') equipment and what factors influence the decision-making processes.

According to the report, IT equipment financing has grown to $40 billion per year. This is a 67% increase from just three years ago, when compared with findings in a similar 2003 IT equipment-financing study commissioned by the ELFA. In addition, IT equipment financing as a percent of total U.S. equipment financing activity nearly doubled from approximately 12% in 2002 to 22% last year.

A variety of trends affecting IT equipment leasing and finance are explored in the study. As part of the research, Alta completed interviews of senior-level executives at bank, independent, and captive equipment leasing organizations this past summer. Based on the interviews, modest growth in IT financing is expected over the next three years. Consequently, lessors should evaluate their competitive positions now to capitalize on trends identified in the study, which include:

• CFOs are paying more attention to IT equipment acquisitions. So much money is spent on IT equipment that many organizations now consider IT spending an integral part of the capital budgeting process;
• Technology changes are actually leading to longer lease terms. PC performance continues to evolve, and lease terms have actually increased. Leases for advanced servers are lengthening, as well;
• Customers are demanding total-solution financing. The bundling of hardware, software, and services is now the norm, rather than the exception, in the business;
• Captive leasing organizations are flex-ing their muscles. Captive leasing companies are growing their asset bases by significantly expanding and enhancing their sales organizations and employing other aggressive strategies;
• Independent leasing companies are being squeezed like never before. Between the aggressive pricing of captives and banks' low cost of funds, the survival of independent lessors is at a crossroads;
• More new business is coming from the reseller channel. Lease finance companies will be relying more on the channel and less on direct sales over the next several years for a variety of reasons; and
• It's harder than ever to establish and recover residual values. Distinguish-ing the differences between IT products is more difficult than ever, promp-ting the rapid commoditization of equipment ' and making it increasingly difficult for equipment leasing companies to establish and recover residual values.

The Information Technology Equipment Leasing and Financing Study can be ordered online at www.elaonline.com/store/.