Will Compugen’s IT equipment rental gambit find success?

Compugen is launching a national rental program aimed at selling new or used IT equipment to public and private sector organizations. The Richmond Hill, Ont.-based IT reseller says the struggling economy could ramp up demand for its rental services business, but some analysts say the financial crisis might create the reverse effect.

Compugen‘s new program, which offers daily, weekly, and monthly rentals, covers the spectrum of IT equipment, including laptops, printers, servers and networking infrastructure. The company has 15 offices across the country and will handle delivery, setup and decommissioning.

Steve Glover, senior vice-president at Compugen, said customers can choose from brand new products or they can rent lower-cost, used equipment from the company’s pool of off-lease equipment. He said Compugen has seen strong demand for rental services for short-term projects, staffing peaks, training, events, and as a way to work around budgeting issues during the ongoing economic downturn.

“We’re starting to get a lot more requests,” Glover said. “IT projects are being put on hold and companies are telling us that ‘if we could just go out and finalize these projects by renting, we’ll be able to finish them.’”

Glover said the program also allows Compugen to take advantage of its portfolio of used assets and help give its customers the best prices possible – proportionate to the age of the technology. He added that strong interest has been shown in the public sector.

The City of Coquitlam, B.C. recently purchased 90 used notebooks to help run its municipal elections, Compugen said. The company also said that Elections Ontario made a similar purchase of printers during the last provincial elections.

But according to Darin Stahl, lead analyst at London, Ont.-based Info-Tech Research Group, Compugen will struggle to find the same enthusiasm in the private sector. Demand for rental services and IT infrastructure purchases has dwindled recently, he said, citing Cisco Inc.’s announcement earlier this week of a planned five-day operations shutdown in December.

“This is going to be a tough strategy to execute,” Stahl said. “With businesses downsizing, headcount is going to be laid off and leave capital assets as spare. They will be put back into the IT inventory and repurposed.”

Jim Westcott, research manager of Canadian business transformation and process outsourcing services research at Toronto’s IDC Canada, said the rental program is both an interesting way for Compugen to continue earning revenue from end-of-line equipment and sell assets to customers beyond the traditional one-time sales or service contracts. He added that there will be a market for this service, particularly among companies who already lease IT hardware.

“Companies that don’t buy and own their own equipment will not have the surplus to provision for extra projects or increased, and temporary, demand,” Westcott said. “If this demand exists and is temporary, renting is definitely more cost effective than buying, particularly if the company can use older equipment and get an even better deal. If credit continues to be an issue for Canadian companies – with banks not lending them money – then renting equipment could fill the need quite well.”

But Westcott also sided with Stahl and said that a weakening financial situation could result in lower demand among private sector enterprises.

“Excess inventory will not be an issue if a company that owns or leases [the equipment] is forced into lay-offs, making renting equipment unnecessary,” he added.

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