Everything changes and sometimes the tenure of status quo can fool one into thinking that everything can last forever. The technology equipment finance business is heading for some major disruptions to their deliverable. This shift will be a result of key component changes in the delivery of hardware to end-users.
Here’s my list of the impactful coming changes:
- The adaption to cloud based services is increasingly eliminating hardware needs.
- The end-users will increase in their dissatisfaction of the current out-dated model as momentum on innovative customer-centric solutions emerge.
- The shift from A3 to A4 in the print industry, an industry representing billions of dollars in the leasing of A3 copier/print equipment, and today A3 Equipment is being recognized as over kill in most business environments. Customers will demand more and more of the much lower cost A4 equipment and this shift will influence customer-centric dealers and OEM's to respond.
- The residual value at lease expirations is continuing to decline. Today's technology is much lower in cost and continues declining. This hardware value evaporation will put pressure on the industry's most commonly used lease known as the FMV or Fair Market Value.
- The new regulations which affect how financed equipment is recognized on balance sheets. These new regulations will also provide end-users more disclosure in the translations of the leases transactional details. Changes to regulations will spark innovative procurement strategies from buyers and those dealers/resellers who finance service revenue along with hardware will be challenged by end-users as those details are disclosed in everyday language. The mystery in leasing will be ending soon.
- Hardware OEM’s will soon be selling their hardware direct to end-users in self-funded as a service models or DaaS Device as a Service. Some are already provide this model. The Print Equipment is one of the few technologies lacking behind in the DaaS model. However, soon more Print Equipment OEM’s will bring to market their versions of DaaS.
- The Large Mega Dealers or Technology Resellers who have the resources will secure large amounts of cash and fund the hardware direct to end-users. The uniqueness in how a provider allows their customers to procure hardware will be a new differentiator in a commodity product market.
- The lower cost hardware such as A4 print equipment allows dealers/resellers to limit per-deal exposure and on their DaaS models they can recoup hardware cost much quicker in the tenure of a self-funded agreement.
- The larger global leasing organizations have the resources to provide unique models of finance options such as subscription based, or use based. These global leasing organizations will squeeze out smaller organizations who lack AI capabilities, have inadequate data, are void modern business processes, and do not have the ability to spend millions in innovative R&D.
- The large global finance organizations will find more value in providing capital directly to OEM's and Mega Dealer Resellers over providing the capital to the smaller leasing partners they currently fund.
The leasing component of the technology deliverable in the SMB2SMB reseller’s channel is extremely valuable. It is illogical to believe that with the amount of available capital within the technology sector that a huge disruption is not coming. The current leasing model which most resellers and end-users will admit is extremely dated, dysfunctional, and product-centric. A perfect recipe for a customer-centric innovative disruption.
The innovation to equipment finance is a passionate pursuit of mine. Over the last year I have had numerous discussion on the subject. Some in the leasing industry are exploring alternatives and have and continue to develop innovative finance solutions. At the same time there are many in the space who are confining themselves to the status quo of the deliverable. The innovation to the leasing industry will come as a fundamental process change. The leasing industry's innovation will not be renaming service pass through. Its innovation will be a process aligning with how a lessee uses equipment to reach their desired outcomes.
Today’s end-users have so much more power in the buying cycle. The information available and the speed to the knowledge of a new way is quicker than ever. Those in the leasing industry who don’t look to reinvent themselves will fall victim to those who do, and the new challenges I have listed in this article are the same reasons others will enter the equipment finance deliverable. Remember it’s worth billions.
“Success in business is a lease from your customer how you innovate will determine its renewal.”
I continue to welcome any opportunity to discuss further with those in the leasing industry and those looking to disrupt the leasing industry. It will be great for the industry if those two were the same.
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