the world of IT finance, marked volume increases, international
growth programmes, acquisitions and competitive pricing have become
the standard in recent months as lessors identify a wholesale shift
in the way businesses acquire technology assets. Claire Hack talks
to some of the market leaders to find out how things are taking
With economic hardship continuing to
affect markets across Europe, the IT finance sector is enjoying
markedly high volumes as customers turn away from outright
purchase, say major captives like Dell, Cisco and HP.
What’s more, there are concrete plans for
growth among both independent and captive providers, as many seek
to move out of their Western and Central European comfort zones and
into newer markets such as Eastern Europe, Africa, Latin America,
China and Japan.
According to many funders, furthermore, a clear
shift is taking place, away from the lease of hardware alone and
towards ‘solution’-based models, including software, storage and
other services in a single package.
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Deutsche Leasing, for example, is
reportedly expecting growth in IT finance over the next year
despite having only joined the international playing field in the
last three months.
Michael Hellmann, managing director of Deutsche
Leasing Information Technology, said: “We’re just getting into new
markets and IT finance products for international markets will be
available from the 2010-11 financial year.
“We only started internationally in IT a couple
of months ago, though, so we can’t tell which market will be the
biggest. We think our main markets are going to be the UK, France
and the US,” Hellmann said.
The company already has a solid platform in
Germany, with volumes of €530m achieved annually, but saw an
opportunity to expand into a market with a potential value of
several billion euros by going live across the 22 countries in
which Deutsche Leasing operates.
Hellmann said: “It was part of our major growth
strategy to move into international markets.”
Software leasing, he added, is also growing in
popularity among Deutsche Leasing’s clients.
“We don’t just integrate software licensing
into an agreement – we integrate elements like customising and
training, so the customer is able to incorporate the complete
software project,” Hellmann said. “We regard software leasing as a
The company’s main competitors are CHG
Meridian, ECS and vendor finance providers like IBM Global Finance,
Hellmann said, which, like many others in Europe, have moved away
from “classic” leasing into much more service-based models.
“We’re also moving in this direction,
increasing service offers like asset management, insurance, data
erasure and others,” Hellmann said.
Pros and cons
However, the high demand for leasing
in the IT sector, much like elsewhere, is offset by a general lack
of customer creditworthiness, even among larger companies, he
“These companies have more than 1,000 employees
and annual revenues of hundreds of millions of euros, but they
don’t have creditworthiness because of the financial crisis,” he
Nevertheless, Germany remains second only to
the US in terms of volumes in the IT sector, Hellmann said,
followed by the UK and France.
And Deutsche Leasing continues to work with
some of the largest businesses in Germany, including vendor finance
arrangements with the country’s market-leading telecommunications
Major captives like Cisco Capital, furthermore,
have also benefited from the economic downturn, picking up
significant market share in response to several bank-owned lessors
withdrawing from the IT finance sector.
The problem, however, is that now that
customers are faced with fewer choices they are becoming more
discerning – and more demanding – Tim Shockley, general manager of
Cisco Capital’s European arm, said.
“They’re becoming more demanding in terms of
what type of financial product they’re looking for,” he said.
“Where traditionally companies like Cisco and other big
manufacturers just thought in terms of closing business via
purchase, we’ve now got a lot more focused on offering financial
proposals. Customers are focused heavily on operating expense-type
solutions to help with cash flow.”
The picture, Shockley added, is the same across
“Market dynamics have changed – how you buy
technology, how you finance it, how you use it and how you replace
it. The financial model has become critical across Europe,” he
Cisco has recently bolstered its
presence in video conferencing equipment, with the recent
acquisition of specialist provider Tandberg – a deal completed
within the last two months.
“They really lend themselves to leveraging a
great financial model, and Cisco Capital can help them scale,”
Shockley said, speaking on the potential for leasing to boost the
new acquisition’s growth.
“Customers want flexibility and aggressive
pricing, which is what Cisco Capital does all day long,” he
“Companies that don’t have the financial
capability of Cisco Capital are in a much more challenged
Demand, Shockley said, is “simply not an
issue”, as opportunities continue to be rife in the wake of the
“By far, [Cisco Technology] would be the
so-called 800-pound gorilla in this space, recognising how many
other players there are to fill the rest of it,” he said. “Demand
isn’t our challenge – it’s how to maximise our efficiency.”
Penetration rates have already risen among
network-switching customers over the last five years, he added, and
are likely to rise in the data centre market as well.
Shockley said: “This is a very big opportunity
for Cisco Capital because the data centre has probably the best
penetration rates with respect to leasing and financial solutions.
We’re putting a lot of energy and focus into that space.”
The company is also looking to increase its
footprint in Europe, with plans to expand into Germany, Austria and
Switzerland in the next few years.
“It’s a big opportunity for us – it’s a massive
market. We’re investing in it heavily because we feel Cisco Capital
can grow in that space much faster than in the rest of the
markets,” Shockley said.
Fellow captive HP Financial Services
(HPFS) is also looking to grow, although its plans are focused not
on developed economies like Germany but on emerging markets such as
Eastern Europe, the Middle East and Africa.
Paul Sheeran, vice-president and managing
director for EMEA at HPFS, said: “We’re looking at how we can
expand our footprint. Overall, we’ve actually done quite well in
the last couple of years – obviously, in the downturn, we haven’t
been completely unaffected, but we’re seeing growth coming back
Agreeing with Shockley’s assessment of the
market, Sheeran added that a significant factor aiding the upturn
at HPFS is the fact that customers who would traditionally have
used cash to fund IT assets are now turning to financial
“Our team are pushing the total cost of
ownership concept, looking at purchasing models,” Sheeran said.
“If you look across Europe, each country has
its own story, but we’re pleased with what’s happened over the last
12 months and we remain well-positioned going forward.”
Working chiefly with large corporate clients,
HPFS boasts a “comprehensive asset management solution”, according
“It’s not just about how people buy assets –
they’re worried about whether assets are disposed of in an
environmentally-friendly way, they’re worried about data privacy
and making sure that’s handled correctly,” he said.
“We’re offering a full asset management
solution through the lifecycle right down to disposal of the
And the model seems to be working, as the
European arm of HPFS is responsible for just over 30% of the
captive’s revenue worldwide.
Software financing also represents another
opportunity for growth for HPFS, Sheeran added.
He said: “There’s definitely a growing market
for software financing as HP builds up its software portfolio – we
would expect that to have a key place in terms of services.”
HP also completed the acquisition of 3Com
Corporation in April at an enterprise value of about $2.7bn
(€2.2bn) and has further plans for acquisitions in the future, he
“As the company grows, organically or by
acquisition, we’re making sure we’re part of that,” Sheeran
Acquisition and expansion have also
been key to Dell’s growth, according to Rick Stipe, director of
Dell Financial Services International (DFS).
This includes the purchase of IT service
provider Perot Systems at the end of 2009, as well as several other
key acquisitions, he added.
“They really complement Dell’s suite of
offerings,” Stipe said.
“The need for an integrated financing solution
has increased tremendously as we transition to solution selling,
providing hardware, software and services.”
The pattern, he added, is being echoed across
Europe, with penetration rates increasing over the last 18
“With the challenges around capital, and the
contraction of credit markets, manufacturer financing or captive
leasing has really been a bright spot,” Stipe said.
“Our partners have actually seen some strong
signals in the market of an economic rebound, which may lead to
improved and higher approval rates.”
Operating in about 16 countries across Europe,
DFS is not focused on a single client base, however, working with
customers of all sizes. Around 60% of its business comes from the
UK, France, Germany, Spain and the Netherlands.
Stipe said: “I think in general terms, we’re
really redefining the way we go to market, the way we manufacture,
the way we build to order and the solutions that we offer.”
The product is still relatively nascent, Stipe
admitted, making up less than 10% of DFS’ revenues, but he expects
its continuing popularity to benefit growth.
“It really helps to pull together these complex
discussions – it provides the flexibility customers are looking
for,” Stipe said.
The company is also seeing “good signs of
corporate refresh”, with sales growth of more than 20% across its
large corporate customer base.
Stipe said: “It’s something we haven’t seen for
a while. Our expanded offering is able to present customers with
much more than just affordable notebooks.
“It includes services such as software, and
we’re moving into an expanded storage product line, which has
helped trigger this refresh.”
Growth, furthermore, is expected to continue in
leasing as clients look to optimise their operating and capital
expenditure, in Europe and globally.
However, Stipe admitted ongoing economic
uncertainty continues to have an impact as some customers delay the
decision to replace equipment with newer models.
“Customers are not looking to make that
decision – they hold off and continue paying rental until they
decide they’re able to buy or refresh,” he said.
The banking perspective
The demand for leasing from corporate
clients is also increasing among non-captives, said Patrick Gouin,
global head of the high-tech division at SG Equipment Finance
“This is basically linked to the fact that
companies no longer have as much cash – until maybe last year, they
were buying equipment or software or other services from their own
balance sheet,” Gouin said.
“Now we’re seeing them moving towards using
capital to drive their own core activities, particularly focusing
on research and development. They’re focusing on what’s key for
them, rather than keeping assets which have a short lifecycle on
Companies are therefore looking more and more
for leasing and financing facilities from vendors and banks, he
“It’s interesting – we’re dealing more and more
with large corporates, together with our vendor partners,” Gouin
“From a risk perspective, it’s safer than
dealing with small or medium businesses. This is one trend which
explains why IT financing is still very safe compared with other
assets like construction or transportation, for instance.”
Alongside the rise in popularity for financing
facilities for “intangibles” such as software and services, Gouin
said, there has been something of a shift away from financing for
He said: “If you look at the financing market
in general – that’s in Europe, APAC and the US – 50% of IT
financing is now software and services. This is our approach to the
The third trend visible in Europe, according to
Gouin, is the decision among many of the large captives to begin
outsourcing some of their financing activities.
“They don’t necessarily want to carry it on
their own balance sheet,” he said. “They’re looking to partner up
with financial institutions like us.”
And with major funders continually disappearing
and reappearing in the market, Gouin said, vendors are now also
looking to the banks that remain in the space to offer them
“We’ve had our ups and downs like everybody but
in the end, we’ve been there for 30 years longer than other
people,” Gouin said.
“People are interested in stability. That’s
what we’re seeing in IT finance – clients are being more selective
now that there is a limited number of finance providers, rather
than cherry picking here and there.”
This is good news for SGEF, he said, with a
steady stream of business continuing to come in, including major
vendor finance partnerships with Microsoft, secured earlier this
The picture overall, then, is one of
growth and resilience, as funders’ partners see solid business
volumes and the global downturn begins to reverse, according to
Rick Trobman, director of global technology programmes at De Lage
He said: “We’re well positioned for the future
in terms of partnerships. So far, 2010 has been good – we’ve seen a
rebound and there appear to be green shoots in the market.”
All signs, moreover, point to a “robust” market
for the foreseeable future, according to Trobman.
“We expected solid growth for 2010 and we’ve
been lending accordingly,” he said.
The market, therefore, is showing clear signs
of health even while the global economy remains weak, and is
beginning to embrace the new trends it faces while continuing to
Trobman even pointed out that the current boom
in tech finance would only hasten this development, saying: “Such
growth is primarily fuelled by the productivity gains inherent in
Main European markets
Christopher Stein, business developer,
Aiming to enter Asia, China, France,
Tandberg (by parent company)
Tim Shockley, general manger, Cisco
Aiming to expand in Germany, Austria
HP Financial Services
Paul Sheeran, vice-president and
Emerging markets – Eastern Europe, the
Dell Financial Services
16 countries across Europe
Rick Stipe, director of
20 percent growth already seen in
SG Equipment Finance
Patrick Gouin, global head of high
De Lage Landen
Rick Trobman, director of global
Growth fuelled by productivity gains
Source: Leasing Life