As long as resellers consider leasing as a last resort missed opportunities will be endemic in the channel, according to Julie Henehan, Sales Director at PEAC (Pan European Asset Company).
Among the lasting lessons that can be drawn from our discussion with Henehan is that old concepts of leasing in the comms and IT sector require fresh ways of thinking or resellers could find themselves at a competitive disadvantage. She says the best course of action for resellers is to reconsider traditional attitudes towards finance and redress the imbalance between the comms sector and other industries where the benefits of leasing are reaped with enthusiasm. That said, comms and IT resellers, so often off the finance message, are starting to get the leasing lowdown and act on the good advice of experts such as PEAC (which is engaged with almost 150 UK IT and comms resellers and manages the Avaya Financial Services programme).
"The IT and telecoms channel has traditionally delivered low leasing penetration," said Henehan. "Most times, leasing was only used when requested by the customer. Today, more partners understand the importance of offering finance to customers who need equipment to enhance their business performance. This is an ongoing process of education and raising awareness. But there's a long way to go before we see the penetration levels achieved in other markets."
The outcome of current trends in ICT procurement are likely to be driven by the evolving preferences of end user buyers and a growing number of resellers who readily build leasing into their modern day propositions. "There is a move away from traditional equipment sales with hardware becoming just a part of an overall solution rather than making up 70-plus per cent of the sale," added Henehan. "The structured payment terms of a subscription can easily be matched to a lease rental which is ideal following the rise of 'as-a-service' solutions in the market. This has driven greater adoption and created the need to develop funding models for intangibles such as whole software and hosted solutions, moving from a straight cash loan to a more sophisticated leasing approach that matches the subscription payments to the lease rentals."
As intangible solutions become a dominant feature in resellers' product portfolios the emphasis will move further away from traditional selling and installation towards a consultative approach, providing value added services on top of the diminishing levels of hardware relative to the overall customer project. "Leasing plays an important part in this consultancy process, driving a different and valuable dialogue around the customer's short, medium and long-term plans and financial budgets, as well as the anticipated impact of planned investments," noted Henehan. "This enables resellers to offer alternative and competitive payment solutions that are aligned with the customer's acquisition strategy, positioning the reseller as a trusted advisor and differentiating their offering."
Henehan cited figures from the Finance and Leasing Association that suggest the UK ICT leasing market was worth £2.3 billion in 2015. With numbers such as this, it is a wonder that leasing has not gone viral in the ICT sector. Low interest rates and an uncertain economy have helped to stimulate this growth, putting a brighter spotlight on the traditional benefits of leasing as an alternative source of funding, with the ability to fix repayments for the term of the lease becoming a more influential factor in rising adoption rates.
The leasing industry has also witnessed the retrenchment of some big global players, leaving independent finance companies such as PEAC to fill the vacuum. Although a new name in the leasing market PEAC brings strong experience in the IT and telecoms space and has worked with many of its partners for over 10 years. "Our organisational structure means that we are agile and quickly adapt to changing market conditions," commented Henehan. "As technology evolves we are constantly reviewing the assets that we fund, with the term 'asset' becoming less and less relevant to the IT and comms market with the move into the cloud and IoT."
PEAC acts as a finance partner to its reseller community, helping them and their customers to finance as much of the project as possible, thereby simplifying the acquisition process. "It is important for partners to combine as much of the hardware and project costs into the lease as possible, to include software, up-front training, consultancy and cabling as well as the hardware element," advised Henehan.
"Operating in the financial services market is not, as a rule, a core area of expertise among resellers, so we have developed operational guidance which details key areas of compliance in simple terms. Our partners also get instant online credit decisions, same day payments, electronic documentation and e-sign, supported by a team that understands the market."
Henehan believes that resellers who act against the wider demand for leasing risk putting themselves at a disadvantage that could jeopardise their progress. To any reseller, leasing is a gift. It is cash in the bank today rather than postponed payments tomorrow. "Leasing allows resellers to be paid up front for the total solution, and PEAC funds them the same day," said Henehan. "We urge resellers to fully embrace the benefits of leasing and encourage them to highlight financing options early in the sales cycle in all of their proposals. Leasing doesn't just mean a structured payment plan. Our most successful relationships are built on the foundation of understanding the lease cycle and making the most of upgrade opportunities."•