IT procurement models are shifting. Is Africa trailing behind?
Traditionally, owning IT assets has been seen as a status symbol. If you could afford to have offices fully equipped with expensive cutting-edge technology, it was believed that you were doing well—and everyone could see it.
Then we entered the Netflix, Uber, and Airbnb era – “the end of ownership” – that has become a game changer transforming industries and existing business models. Consumers became less interested in the status and ephemeral personal fulfilment that came from owning things. Instead, they were motivated by a desire for fulfilling experiences that enrich their lives.
These disruptive technologies not only transformed consumption models in the consumer market, but in recent years, we’ve seen businesses follow suit with the rise of usage-based models such as leasing, as-a-service (aaS), and subscription services that offer “access over ownership” to manage and improve operational efficiencies.
However, many African countries still have a certain fascination with owning their IT assets, while in Europe and America, businesses have abandoned ownership models for more flexibility and agility. According to InnoVent, one of the fastest growing IT financing and leasing companies in Africa, the reason for this is that a lot of African businesses follow traditional business models and are caught up in doing things the way they have done them for many years.
As we move towards accelerated digital transformation brought upon by the pandemic, where change is constant and escalating, doing things the same way we’ve done them for many years, because of tradition, is imprudent.
Traditional business models often follow traditional methods, which come with a variety of pitfalls. When we are looking at IT equipment, these include large upfront costs, hassles of maintenance, and the frustration of obsolescence.
With this in mind, we are starting to see a shift in the way IT is procured globally where the usage of the equipment is more important than the ownership of the hardware. This is becoming a preferred method to meet business requirements on demand and address the concerns and challenges of depreciating IT assets.
The growth of pay-per-use models such as leasing, as-a-service (aaS), and subscription services is evidence of this shift. In Nigeria alone, according to a report by the Equipment Leasing Association of Nigeria (ELAN), for the tenth consecutive time, the Nigerian Leasing Industry recorded growth in business transactions. After recording a sharp decline in growth from 14.5% in 2019 to 4.3% in 2020, the industry recovered with a 28.65% growth in 2021.
Despite this reported growth, however, some think that by leasing equipment they are settling for an alternative, inferior option because they cannot afford the expenses of owning their IT equipment. This is not true. Equipment leasing employs strategies that ensure the most productivity is gained from the equipment, and when it is time to upgrade, equipment is always kept up to date.
Leasing your IT equipment lets you acquire the latest hardware at a manageable cost while remaining flexible as your technology needs grow over time. By using this method, cash flow is preserved and redirected to other areas in the business where it can be utilised for growth opportunities.
Is Africa ready for this change?
While first world countries might have an upper hand, African businesses can follow suit by adopting pay-for-use models.
IT equipment depreciates, and buying it upfront comes with drawbacks. Increasing budget flexibility, protection against obsolescence and equipment decommissioning or disposal services will drive overall industry growth.
As the continent becomes more comfortable with the concept of not owning physical assets, we are going to experience the growth in expectations towards effortless access to goods and services.
To learn more about leasing with InnoVent, you can visit the InnoVent website.