Contrary to popular belief, leasing computer equipment is not just for capital-starved companies, according to the executive in charge of IBM's leasing-finance unit.
IBM Global Financing provides IT financing and leasing to 95 of the 100 largest companies in the US, according to Joseph Lane, general manager of IBM Global Financing and president of IBM Credit, speaking on a conference call yesterday.
Leasing hardware instead of purchasing it lets companies focus their attention and capital on their core business, according to Lane.
"Many companies want to be in the business of their own business and not in the business of staying current with the latest technology," Lane said.
Other benefits of leasing include avoiding computer obsolescence and sidestepping the problem of shedding obsolete equipment, he said.
Avoiding the hassles of obsolescence was a driving factor behind Nabisco's decision to lease its hardware, according to Joseph Beggs, vice president of enterprise operations at Nabisco, who was on the conference call at IBM's invitation. Food manufacturer Nabisco used to be able to donate its old hardware to schools, nonprofit organisations and charities, but most no longer want older equipment, he said.
"Disposition at the end of the life of an asset is becoming more and more difficult," Beggs said.
Three years ago, Nabisco began to lease its hardware through IBM Global Financing, including three IBM S/390 servers, seven RS/6000 servers, an RS/6000 SP system, 25 IBM AS/400 servers and 8,000 IBM personal computers, he said. Nabisco does not currently lease any software or services, but the cost savings visible from leasing hardware are pushing Nabisco toward leasing those as well, he said.
Nabisco is far from alone in its assessment that leasing makes good sense, according to IBM Global Financing manager Lane. Computers and other computing equipment are the most commonly leased equipment in the US., and some projections say that leasing of desktops will grow from its current level of $US4 billion to $6 billion by 2002, according to Lane.
IBM Global Financing's share of that business will likely be quite large, given that Big Blue as a whole is big enough to have birthed big baby divisions. If IBM's Global Financing unit were a separate company, it would rank as one of the top 20 banks in the world, and that makes IBM Global Financing a solid contributor to IBM's overall financial health, according to Lane.
"We comprise about 12 percent of IBM's earnings," Lane said.