Openness can transform IT leasing
IT leasing has often suffered from a bad reputation primarily because of poor customer experience at the end of the lease period. Complex processes, ineffective end-of-lease communication, and a lack of effective logistics channels on the lessors side too often result in customers being left disappointed – and often out of pocket. How can lessors begin to break down these negative perceptions and rebuild the reputation of leasing as a core part of a successful IT asset management strategy?
Traditionally, unrealistic residual values have often been used as a way of reducing rental costs, which leads to customers making decisions based purely on cost and then being penalised for this at the end of the lease period. Lessors have for too long made end-of-lease management a prohibitively complex process in the hope that customers will simply give up and be forced instead down the road of either expensive lease extensions or having to purchase the equipment outright.
Leasing offers a range of well-known benefits over buying, including spreading equipment costs over a longer period, eliminating the need for deposits that tie up valuable cash flow, and boosting profitability by enabling both asset and liability to be removed from the balance sheet. However, total cost of ownership is an often-overlooked factor – organisations may not be fully aware of the long-term benefits that refreshing assets at the optimal time brings in terms of reduced maintenance and support costs, as well as the man-hours saved by not forcing employees to work with slow, outdated equipment.
Demand more than just leasing
Traditionally, leasing companies and financiers focus primarily on the financing aspect of leasing and investing in their own internal systems for managing leases rather than providing practical, easy-to-use tools designed to support end users. Taking IT leasing beyond mere financing means delivering an overwhelmingly positive customer experience at every stage of the process. This is achieved by thinking carefully about what customers really want, and then measuring their satisfaction. Combining leasing, management and replacement into a single seamless and flexible service means we can reduce complexity, increase transparency, and ultimately save time, money and hassle for customers. With a strong push in this direction, the industry can finally begin to affect a sea change in how it is perceived.
The first step for the leasing industry must be to build open, honest and sustainable relationships that provide valuable long-term benefits for lessees. What does this mean in practice? For a start, costs must be transparent so customers can best compare the benefits of leasing over buying. Residual value (RV), for example, shouldn’t be factored into the leasing calculation if the lessor doesn’t think that the equipment will be returned. The RV should always be disclosed to the customer – by not disclosing the value, leasing companies are often misleading customers as to how much their lease really costs, whether this is an intentional deception or not. The customer should be able to see all costs up front, including how much extension rentals will be should the lease be extended and the asset not returned. In this way there are no nasty surprises and the customer always knows what the lease is costing.
This transparency must then be paired with a simplicity that makes things easier for the customer throughout the leasing period. For example, at 3 Step IT customers are free to choose their own suppliers and equipment, and order based on the agreed finance limit. This gives the finance function full control over budgeting and allows IT to benefit from flexible purchasing, while the one-stop-shop approach eliminates the hassle of dealing with multiple leasing partners. All initial data entry into the asset register is handled on the customer’s behalf, and customers can complete delivery acceptances electronically using the dedicated asset management tool, saving a huge amount of time. A well-designed asset management tool is as important as financing to customers – simple tools and processes are essential to help customers manage their lease in a transparent, straightforward way.
The game-changer – effective, efficient return and replacement
When setting up these tools and processes the end of a lease must be considered too: asset disposal should be simple and hassle free. At 3 Step IT we actively encourage customers to return assets by making it as easy as possible for them to do so, and we accept 100 per cent of returned equipment rather than cherry-picking only the assets with the highest resale value. By doing this the uncertainty is taken out of leasing, making it a far more attractive proposition. We believe that as an industry we need to work harder to move to a more customer-centric model, carrying out further research into customer satisfaction and retention rates in order to make the reputation of the leasing industry one to be proud of. Lessors, lessees and vendors will all benefit from this approach: when the lessor wants the equipment back just as much as the lessee wants to get rid of it, vendors will benefit from repetitive sales based on the managed lifecycles.
As you can see, at 3 Step IT our aim is for the entire industry to take IT leasing beyond mere financing. We strongly believe that by focusing on the customer experience, providing dedicated, expert support at every stage of the process, and purging complexity from end-of-lease management, we can change the dynamic of the IT leasing industry for the better and re-establish leasing as a key component of a successful IT asset management strategy.
The article was originally published in World Leasing News September 11, 2012