A growing number of enterprise IT customers is shifting IT procurement strategies in favor of purchasing laptops, PCs and servers instead of leasing equipment. The shift comes as interest rates continue to rise and enterprise customers have grown disenchanted with leasing "gotchas" such as penalties for late returns and damages.
"We're seeing an increased shift toward purchasing due to increases in interest rates and as companies are realizing that they're not going to return equipment back to the lessor on time and it makes more economic sense to buy the equipment outright," said Frances O'Brien, an analyst at Gartner. O'Brien spoke at an IT and software asset management conference that the IT research firm held in Orlando Tuesday.
IT leasing tends to be cyclical and had become an increasingly popular procurement strategy over the past three years after interest rates plummeted and IT managers were under enormous pressure to cut costs. However, as interest rates have begun to rise, some companies that ended up paying more for leased equipment due to late returns or damaged equipment are leaning toward returning to a purchasing strategy, said O'Brien.
That maps with feedback from several attendees interviewed at the conference.
For instance, Freddie Mac conducts a purchase-vs.-lease analysis every 18 months, "and we've continued to purchase," said Craig Robles, an IT asset manager at the home financing agency. For its part, Freddie Mac is increasing its use of laptop computers and the costs of paying for scratches and other damages under a lease "just aren't advantageous to us," said Robles. "It makes more economic sense for us to purchase."
An IT acquisition manager at a large pharmaceutical company who requested anonymity said the drug firm she used to work for had historically leased its IT equipment. However, when the company recently merged with the larger pharmaceutical organization, "we shifted to their purchasing model." That's partly because the acquiring company relied on an IT purchasing strategy and also because of the recent rise in long-term interest rates, she said.
For other conference attendees, it's still business as usual, however.
"We don't lease now, and we'll probably stay consistent with purchasing hardware," said Molly Muir, an IT asset manager at Yellow Book USA, an independent Yellow Pages publisher.