Sotiris Kanaris finds that lessors need to pay close attention to the ‘small print’ for 3D printer leasing.
The technology behind 3D printing, the process used to create a three-dimensional object, also known as additive manufacturing (AM), has existed in some form since the 1980s.
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In recent years, demand for 3D printers has increased, due to expansion from prototyping to production-line applications.
Head of the technology solutions international business line at BNP Paribas Leasing Solutions Raf Ramaekers says there has been a "democratisation of 3D printing technology" because of a fall in pricing behind the technology allowing a broad range of industries to use it.
From 3D-printed scale models of buildings to orthopaedic prosthetics to spacecraft parts, 3D printers have already found their place in global manufacturing.
The rise in the use of 3D printers has triggered demand for financing them, with some lessors now seeing a growing business opportunity. Ramaekers says that expanding into new asset classes, such as 3D printers, is part of the company’s growth plans.
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By GlobalData"We have noticed a steady rise in demand for 3D printer leasing in recent years. Research shows that at a global level, the market is doubling in volume each year, and is growing 25% per year in value. For this reason we have decided to address this market," adds Ramaekers.
Leasing
Director of technology at Lombard Technology Services Riessen Hill highlights that leasing is a sound option for businesses wanting to use 3D printers, as the asset sector will remain in both technological and supplier flux for at least three to five years.
"Leasing enables buyers to cycle new technology more quickly, which is especially important as this segment is still evolving," Hill explains.
Some of the lessors who operate in the market offer packages rather than solely funding for the piece of equipment. For example, BNP Paribas Leasing Solutions’ full 3D printing package includes the 3D printer itself; a PC control station; a 3D scanner; 3D modelling software and soft costs such as installation.
As an effect of increased demand, lessors operating in the area have witnessed growth in the value of loans dedicated to 3D printers.
Lombard’s portfolio in this segment of the market is growing on a quarterly basis, while GreatAmerica Financial Services – which operates in the US – has seen the number of transactions written in 2015 double in numbers compared to the year before.
Director, national accounts at GreatAmerica Financial Services Alecia Kramer says: "So far we have seen the most activity with jewellery manufacturers and designers." Kramer adds that among their customers for 3D printer financing are signage companies as well as office equipment dealers who want to set up demo rooms.
The size of the deal can vary depending on the deployment of the equipment by the end users. Deals related to production deployments tend to be of higher value than ones for prototyping or printing of personalised objects.
"Given the extremely wide range of price points, pretty much any company can buy one of these products to experiment with. We have got deals of £1,000 (1,289) on our book as well as big-ticket machines close to £1m," says Hill.
Ramaekers says that most of BNP Paribas Leasing Solutions’ clients are in the prototyping business where the average tickets are 50,000-70,000.
GreatAmerica Financial Services, which works with independent copier dealers who primarily sell to SMEs, finds the average deal for 3D printers to be between $35,000 (31,400) and $40,000.
Kramer says that GreatAmerica Financial Services offers up to a 72-month term, but the majority of business written has been of either 36- or 48-month terms.
In a market where technology is evolving rapidly, residual values can be an issue for lessors and lessees.
BNP Paribas says the 3D printer market cannot support a standard approach towards residual values because it is very young, it is undergoing rapid technological evolution, it has a high rate of obsolescence and its second hand market is not well-established.
Hill says: "Taking residual values in a segment with ongoing technological and supplier maturation is not for the faint-hearted. There is significant long-term opportunity here; however with opportunity comes proportional risk.
"When taking residual values in a sector in transition requires a thorough and informed asset management and supplier evaluation process. The lessor winners will be intentional, not situational in their approach to this segment."
Kramer says that GreatAmerica is willing to take residual positions on the equipment, although 70% of its end-user customers interested in this equipment have chosen not to have a residual position.
"The additional 30% of end-user customers are looking for that ability to either return, upgrade or purchase the equipment after they have made their initial financing payments," adds Kramer.
Competition
Despite the rise in popularity of 3D printers, the number of European lessors who have chosen to enter this market is low. In stark contrast, many US lessors offer 3D printer finance products.
Kramer tells Leasing Life: "The majority of our competitors offer financing for 3D printers but no one is leading the charge in terms of providing unique structures or programmes associated with this technology."
The market is currently dominated by finance companies, as only a few captive finance companies have been established, with one example being Stratasys, which has its own portfolio in the US.
Kramer says: "Any of the other manufacturers we have engaged with do not have their own in-house financing, and the majority of them do not have a strong desire to build a tight partnership with a finance company at the moment.
"This is very different from what we have experienced within the traditional copier and printer market space, where there are manufacturers working strategically with finance partners in order to bring more financing options to the marketplace."
Hill says there are advantages for finance companies which enter the market early. "Early adoption and strong market knowledge can only help, so understanding the market from its infancy is paramount. Understanding the suppliers, the applications, the software relicensing and the secondary market from the outset can only put Lombard in a strong position."
Hill says that successful lessors will need to make a commitment to participate "with both feet or pass [on the opportunity]."
"This is not a sector for interlopers looking to make a quick return. As the market continues to mature, it is likely both direct and indirect channels will become fundamental go-to-market financing strategies," explains Hill.
He anticipates that some manufacturers will offer financing schemes in the future, but independent finance providers will also be operating in the market.
Challenges
With the ongoing development of this technology, lessors are faced with various challenges which prevent them from having the same approach to this technology as to traditional printers.
Ramaekers speaks of a "rush" by manufacturers bringing new products to the market. "Some of these products lack the test of time in terms of reliability and performance," he adds.
According to Kramer, there is also uncertainty around what happens at the end of the lease term.
"We do not have a solid portfolio of experience to say who is going to be interested in buying this equipment if the customer chooses to return it and what the value of that equipment might be," says Kramer.
The immature second hand market is also challenging lessors. Kramer says there isn’t a specialised player in the US looking to resell this equipment.
"Obviously there are a lot of resellers of traditional copiers and multi-function printers; when we asked them about their appetite to partner with us to ultimately resell the equipment we got some hesitation," says Kramer.
In addition, lessors need to stay updated and gain in-depth knowledge on the technology while it develops.
Hill says that lessors need to be prepared for both supplier and technological evolution, ensuring that they understand the primary application and potential secondary applications for high-end devices.
He adds that they need to safeguard themselves by gaining a strong understanding of software relicensing, standards and suppliers as they continue to mature.
Another obstacle for the development of the 3D printing finance market cited by Ramaekers concerns the route-to-market, as vendor finance is not yet the rule in this market.
Dealers and resellers
The dealer channel of this market segment is not yet developed, as some office equipment dealers are reluctant to sell 3D printers due to high costs.
"The dealers I have spoken with, who added 3D printing to their overall product mix, have said it is very expensive. They are required to have a demo unit within their showroom, most manufacturers will require a dedicated sales resource and they need to have at least one or two service technicians that are factory-certified," explains Kramer.
Kramer believes that these costs could impact the adoption rate of 3D printers.
Apart from costs, offering 3D printers requires a change in the role of resellers. Resellers need to work with clients to prototype and demonstrate their product offering which takes time to adopt into a commercial application.
"If you are moving from traditional product manufacturing process to a 3D manufacturing environment, clearly there is additional testing to be completed before releasing into the live environment.
"I can understand how the lead time might be lengthier than historically replacing a piece of manufacturing equipment on a like for like basis. As the market becomes more mature these lead times will reduce over time," says Hill.
Hill does not think that this factor can act as an inhibitor to the future growth of the 3D printer market.
Future
According to International Data Corporation (IDC), global spending on 3D printing will grow at a 27% compound annual growth rate (CAGR) from nearly $11bn in 2015 to $26.7bn in 2019.
In Western Europe spending on 3D printing is forecast to grow at a 29.6% CAGR from nearly $2.6bn in 2015 to $7.2bn in 2019.
Hill says: "3D printing is a market poised to go mainstream, with the potential to revolutionise many business practices by 2020. 3D printing will transform the market for prototypes, manufactured parts and packaging."
According to Hill, the largest opportunity for 3D printing is not in the home, but in commercial applications such as manufacturing, healthcare and education.
Ramaekers says that part of BNP Paribas Leasing Solutions’ development plan consists of offering 3D printer leasing to the healthcare sector, with a focus on dentistry.
"Our ability to finance 3D printers proves to be a real asset especially in dentistry, where 3D printers may become a real game changer," says Ramaekers.
Hill says that prototyping will continue to create a strong demand for 3D printing services in the following years.
"In house prototyping will increasingly become a viable option, making it a key competitive advantage," says Hill.
Hill also expects growth in the low cost end of the market, with the printing of personalised objects becoming more appealing.
Lombard’s technology services team expects that desktop engineering software providers such as Adobe and Autodesk will enable the mid-market to take the technology mainstream.
In addition they expect that several other vendors will enter the market after the expiration of intellectual property licenses, creating a declining trend in pricing.
There is also an expectation that large players in office equipment will enter 3D printing.
"The market is likely to be rationalised by other players, specifically Hewlett-Packard (HP), Canon, Konica Minolta, Ricoh and Epson," says Hill.
HP is already developing Multi Jet Fusion 3D printing technology which will cater to the commercial sector.
Apart from new manufacturers entering the market, Hill anticipates a future change in the supply landscape through a number of mergers and acquisitions.
As 3D printer models develop and printing speed increases, the role of this technology in global manufacturing will become more significant. Global management consulting firm AT Kearney characterises 3D printing as a manufacturing revolution.
Neil Gershenfeld director, the centre for bits and atoms at the Massachusetts Institute of Technology says: "The revolution is not additive versus subtractive manufacturing; it is the ability to turn data into things, and things into data."
