Any increase in leasing raises questions about risk management. According to Patel-Panchasra "all funding institutions have risk management systems in place. IT vendor financing is different from that of main stream banking in that it services only a limited customer base, and is product specific. As a result IT vendor financing companies are not exposed in any way to the vagaries  or complex lending instruments we have heard much about recently."

This is a view shared by Nigel Hughes from Compass Management Consulting. "Risk management need not be complex. By comparison with rating the risk of complex financial instruments, the risk assessment on most deals is simple and is based on the revenue stream from the client looking secure. In public sector cases, the risk issues gets easier."

Not everyone agrees that vendors are the answer. Kate Craig-Wood from Memset, an IT hosting company, when asked if the vendors could afford to fund an expansion of leasing says "quite possibly not, but IT hosting/utility computing providers are."

Craig-Wood makes an interesting point. Hosting has exploded over the last decade with many hosting companies running their own managed services arms, something that Reger has also identified as a key target for IT vendors. There are also a lot of companies involved in outsourcing who, as part of their agreements, have taken on long term leasing projects from clients.

For the outsourcing vendors, taking on the lease of hardware has given them a very powerful voice when negotiating with IT vendors. As virtualisation has become more prevalent, outsourcing vendors have used it to make better use of the hardware under their management.

With power and cooling costs now outstripping the cost of hardware, Craig-Wood believes that "rather than buying servers earmarked for specific projects, software developers / SI's should be looking to host their applications in the Cloud, and simply scale up their resources (and therefore their costs) as required - or even in response to real-time demand."

This is not a new model. During the massive expansion of the dotcom boom, we saw IT departments being urged to look at moving systems off site. The goal was the same - reduced hardware cost. Back then, it was about Y2K and a web presence, today it's about a lack of liquidity and the need to continue IT development to stay competitive through the current downturn.

So can leasing, whether it be direct to companies or through companies such as Memset, replace mainstream finance. Lucente ot only believes it can but goes on to say "since the inception of IT leasing, IT vendors have been able to do a generally better job at lease financing IT assets since they understand the underlying technological life cycles of IT and also have access to low cost of funds --- just like the largest money center banks. So leasing from IT vendors can have numerous advantages that include:

  1) Better IT acquisition planning and lease financing (a "big picture" planning perspective that combines expertise in technology with lease financing)
2) Disciplined technology refresh programs to maintain current technology (removes older, less efficient equipment and lowers TCO due to lower OpEx inherent in new systems)
3) Convenient IT asset recovery services, including lucrative trade-in credits for older, inefficient equipment
4) Energy rebate credits from local utilities for the installation of new, energy efficient equipment.

No matter how long it takes for the banking market to recover, it seems that leasing, managed services and cloud computing will be among the big winners in the new business models for IT.