Market still suffering from under-capacity and
overpricing
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A recent report from Intellect, the
UK’s technology industry association, highlighted that the
recession has led businesses to turn to IT to exploit cost
reduction opportunities and efficiency gains, especially where the
customer’s cash outlay can be minimised.
However, according to the Finance &
Leasing Association, the market was down around 28 percent
year-on-year in the first quarter.
“But the situation is improving,” said John
Bennett, managing director of Bank of America’s Global Vendor
Finance Europe arm and former chairman of Leaseurope.
“As investment decisions are deferred, the
catch-up effect should be more significant than normal next
year.”
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By GlobalDataVolumes trending up
Dave Wesson, head of financing
solutions at Computacenter, a services provider and the UK’s
largest corporate reseller of IT equipment, agreed, saying:
“Absolutely, more businesses are considering finance. The volume of
interest and demand is definitely going up, although there is
greater caution around what credit and finance will be
written.”
Computacenter writes the majority of its £90
million (€101 million) of customers’ finance on its own book, with
the rest written by its panel of funders.
“Our customers require continued flexibility,
which finance companies cannot always meet. We therefore write
business on our own balance sheet, and then take financing out
ourselves, behind the scenes, to maintain cashflow,” Wesson
explained.
In addition to writing business on its own
books, Computacenter uses a panel of funders, which include IBM
Global Financing, HP Financial Services, Asset Advantage and De
Lage Landen, among
others.
Lessors more
selective
In recent months, and as a result of
the economic turmoil, Wesson has seen lessors become more selective
about what business they write.
“It’s fair to say that as lessors become more
selective about how they use their capital they have become much
more cautious on credit, with timescales becoming longer and prices
rising,” he said.
Bennett attributes this to a change in balance
of supply and demand.
“Pricing and margins are now more realistic,”
he said. “Following a period where there was overcapacity and
under-pricing in the market, now there’s under-capacity and
overpricing.”
Margins have particularly changed for larger
IT deals, where they have risen, Bennett said.
“It’s slightly perverse,” he continued.
“Historically, larger deals had smaller margins due to the scale.
But now, because there is less capital available, larger deals
generally have greater margins than smaller ones.”
Looking to the future, both Wesson and Bennett
anticipate that the markets will recover by next year – but even
now, all agree that IT is still a good market to play in.
“Sure, growth rates in investment spending
have slowed down in IT, but it is still more buoyant than many
other asset sectors,” said Bennett.
Jason T Hesse
IT brokers walking away from
deals
