I have recently written two articles about renting your ICT hardware, or, as we like to refer to it, hardware as a service (HaaS).
Now let me shock you a bit and tell you who should not rent their hardware.
And don’t worry, this is not going to be the argumentative equivalent of the job applicant telling their interviewer that their worst quality is that they work too hard. I honestly believe there are businesses that are best served by not renting their ICT hardware.
A business that has heaps of money that they are not using should not rent their ICT hardware.
Now, I can see you smirking already. What kind of business has heaps of money simply lying around? Well, to give one example, a medical doctor’s practice might be one. I am thinking of a specialist who has his own practice. He is well-known in his field and among potential patients, so he is not going to appoint scores of partners – patients want to see him. He is also not going to expand into various cities. He likes his home city and his patients come to see him from all over the world. It means that he has no need to invest his capital into expanding his business. He also makes a good profit.
So, if he or his receptionist needs a new piece of hardware, simply buy it upfront. The practice has the cash to do so.
This example is maybe not one of a typical business, but it serves to make a point. Because many businesses fall into this category. It is not simply about having heaps of money. It is that this kind of business is not using their capital or their potential access to funding to actively expand their business.
Be honest with yourself if that is the case. If you are not actively growing your business (think: new products or new locations), then your business is much better off to simply buy your hardware with available cash. If the business is a bit bigger, even if you have surplus cash, your hardware replacement plan might involve some saving to be able to buy the right hardware when needed. This brings me to the second kind of business that should not rent their hardware.
A business that is financially strapped should not rent their ICT hardware.
This kind of business is battling to make ends meet month to month. They need new hardware. What do they do? They rent it – or opt for some other financing option, which is often even worse than a rental.
Let me clarify – renting your hardware when you are cash-strapped is a valid option. But for any business except one that is aggressively expanding, it should at best be a short-term solution. Any fifth-grader with a decent grasp of maths can tell you that, in the long-term, it is more expensive to rent your ICT hardware than to buy it.
Like in the previous example, the medium-to-long-term goal of this kind of business should be to have a hardware replacement plan that includes planning and saving for the capital layout of hardware purchases. If your business is in a difficult financial situation and it is not because you are pursuing ambitious growth, you need to re-examine everything you do and why you do it, including your ICT hardware strategy. You might get yourself into an even worse financial situation if you blindly grasp at straws without addressing the root cause for your business’ financial struggles. This leaves us with the question: who then should rent their ICT hardware?
A business that is expanding and needs to use its money to finance growth rather than depreciable, non-income generating assets should rent their ICT hardware.
This is certainly not the only kind of business in existence. But there are many such businesses out there.
If you have you ever asked the question, “How many income-generating opportunities could have been acquired with the funds that were laid out for these depreciating assets?” then HaaS is for you. Feel free to contact me if you want to discuss whether HaaS is right for your business or not.
And you are welcome to like and share this article if you found it helpful. If this service is good for your business contact Hannes Van Der Merwe (Hannes@grovation.com) or Sarel Visser (email@example.com).