Overview

The computer rental and leasing industry (SIC 7377) includes those companies that buy, sell and lease new and high technology computer equipment. This is not to be confused with those companies leasing computer time or financing computer leasing. Companies in this sector primarily service other businesses on the customer site within multiple verticals, including: financial institutions, transportation companies, original-equipment-manufacturer (OEM) finance groups, maintenance companies, software distributors, and well as individuals with personal needs.

Industry’s First Peak: The 90s

While computer rental services existed before the 1990s, they hadn’t quite hit their stride in profitability. In the 1980s, leasing grew much faster than business, which lead to the boom in the 1990s where 70 percent of desktop computers, large and small servers, and telephone systems were leased and 30 percent were bought.[1]

By 1992, computers overcame aircraft as the most frequently leased item in the United States.

In the early 1990s, the computer rental industry saw sales figures between $15 billion and $25 billion a year. According to the Equipment Leasing & Finance Foundation (ELFF), this number grew to $183 billion by the late 1990s.

It started with businesses’ desire for a “proof of concept,” not wanting to jump into a new capital investment without first testing the waters. Then came more short term computer needs, like off-site testing, temporary employees, and one of the industry’s most profitable markets: trade show and exhibitions.[2] In almost every scenario, buying and/or shipping technical equipment, particularly large sets of computers or large format display screens, renting is a more viable option through price and logistics.

Despite the continually dropping price of electronics in the 1990s, the rental industry continued to remain hugely profitable. This is in part due to these companies providing additional services and insurance fees.

Continued Growth: Early 2000s

With the Great Recession, this industry saw continued growth. Companies once again saw the advantages of renting and leasing equipment, utilizing operational costs instead of limited capital funds. This further allowed companies to avoid any type of deduction as a result of depreciation. This cost falls on the owner of the hardware, or the rental provider, and relieves the company of any liability while remaining off of the balance sheet.

Short-term rentals were and remain strong among the trade show and exhibition group that evolved in the 90s. Other corporate needs continued to revolve around companies’ hesitancy to commit to a purchase or a long-term lease when the price of PCs continued to drop, and the technology was rapidly evolving with new models replacing old ones faster than had ever been previously seen. However, with the continued drop of PC prices, the industry would see the face of its greatest issue that would come to fruition in the 2010s.

The Age of Mobility: The 2010s

Every year in the 2010s has seen devices become smaller. Smaller and cheaper. This has changed the rental market considerably as it is working with smaller margins. As a result, rental companies have had to increase their services available to customers, including: delivery, on-site installation, imaging, maintenance and 24-hour technical support.

Computer rental companies have also had to adapt to the customer demand for smaller portable devices – namely tablets. Many of the customers who would have previously rented laptops now prefer the more easy to carry Apple iPad, Samsung Galaxy Tab, or Microsoft Surface Pro. The trade show and exhibition crowd have taken a particular preference to tablets over laptops as they are more easily able to fit into kiosks, or for an employee to carry around the floor to collect information. Marketing companies use the devices for data collection and provide them to team members for field surveys. That means that rental companies have to rent the devices often, and in great quantity.

The Future: The Age of Adaption

While some research organizations see the shift toward mobile technology as a weakness of the industry, rental companies have embraced the mobile demand and are capitalizing on it. Firms such as IBIS do not report on tablet rental as a part of the industry, rather as a competitor. In its latest report,[3] the research firm reports industry revenue at $1 billion dollars, seeing a 1.5 percent decrease in growth over the last five years.

While the margins are in fact, smaller, which has caused the industry to contract in combination with the falling prices of PCs, the demand for temporary use of tablets are on the rise. Much like their predecessor, the notebook, new tablets evolve so quickly that many organizations do not want to invest in hardware when there is a new model ready for release just around the corner. This is especially relevant as many tablet use case scenarios in corporate settings are temporary. In fact, there are budding rental companies that are now specializing solely in the rental of tablets like the Apple iPad. More established rental companies are catering to the new market, while holding on to the existing demand that remains for more heavy computer needs.

References
Computer rental market penetration grows – Biz Journals
Computer rental and leasing – Highbeam Business
Computer Rental in the US: Market Research Report – IBIS World