n COVER STORY
The Return and Returns OF RENTING
The renting business might seem old hat. But a closer look at LA Technologies’ business shows otherwise.
ENTING IS outdated. After
all, in the new era of hosting and cloud computing, when actually having to touch and manage hardware is considered an absurdity, why would anyone rent? And if no one wants to rent, then a business based on renting is as crazy as creating a ladder to the moon. Or is it? Not if you ask Mumbai-based LA Technologies. Renting hardware makes up 30 percent of the system integrator’s topline. Lawrence Albert, founder and director, LA Technologies, is proud that amidst the rush of new technology jargon, his company’s been able to discover ongoing opportunities from a fairly old concept. If you think you can make a run at such a business, here’s a SWOT analysis of LA Technologies’ renting business.
STRENGTHS For anyone who thinks that renting is past its prime, picture these enterprise use-case scenarios: An application that needs to be tested. A migration project at a large organization. A project that needs to scale up fast. A one-off project. A hard-to-get piece of hardware that goes bust. A trusted vendor failing to deliver hardware in time. You get the idea, it’s a pretty long laundry list.
WHY IT WORKS v For enterprises: Renters
offer features that others players find hard to match, including a higher speedof-order-fulfillment, and shorter-term deal, as low as three months.
v For SIs: Renting creates a
steady stream of income, a blessing in uncertain times. And it also allows renters to get a foot in the enterprise door, which can lead to more profitable service and support deals.
ing very large enterprises. Our clients include major IT/ITES and financial organizations undergoing migration projects. In fact, we’ve supplied the entire infrastructure for some of India’s major banks, for a quarter, on an opex model, while they migrated to their new datacenters. Interestingly, some of these projects were extended to multiple quarters because of delivery delays from OEMs,” he says. LA Technologies’ experience shows that there’s a healthy business model here. Since it ventured into renting
storage, networking, power and cooling, UPSes, IP phones, and firewalls. The depreciated value of the inventory that LA Technologies currently possesses is around Rs 4 crore and it keeps investing more. All that ready-to-ship hardware is a key strength for renters. “When equipment conks out at 1 in the morning, no tier-1 partner is ready to provide replacements on a war-footing. They will take at least one business day. But LA can provide it within a matter of few hours,” says Albert. “Our huge stock of equipment helps us make deliveries within really short deadlines.” The terms that renters like LA Technologies offer also work to its benefit. “While OEMs or tier-1 partners will only rent out equipment for at least three years, we are very flexible. We give equipment for a term as short as three months,” says Albert. For LA Technologies, the renting business also ensures a constant stream of revenue, a blessing in these uncertain times.
LIMITATIONS Renting, however, is not everyone’s cup of tea. Even companies like LA Technologies that have a proven track record, have to rely on a very traditional approach—word of mouth marketing. “The renting business runs on references from happy customers, which is the reason why we don’t market it very aggressively. Most customers come to us,” says Albert. That makes it hard to profit from emergencies. With a number of customer requests stemming from outages that need to be plugged fast, it only makes sense that LA Technologies should profit from emergencies. After all, practically everyone else does it, from dry cleaners who charge premi-
In the last year, LA Technologies has seen more competition from vendors and large solution providers have seen the untapped potential in the renting market and want a piece of the pie. All of these ideas look great on paper, but the question is: Do renters have real customers? Plenty according to Albert. “Renting requests come from all types of organizations includ26
INDIAN CHANNELWORLD NOVEMBER 2012
about five years ago, LA Technologies witnessed consistent growth in that space. The company provides the entire gamut of basic infrastructure hardware components including, servers,
ums for a one-day turnaround, to cab services that charge higher rates for taxi booked within 30 minutes of departure, compared to those booked a day in advance.