While the renting services industry for electronic test equipment is not new, the economic conditions of the past few years have increased awareness about such services, and organizations across industries including aerospace and defense, communications, automotive, and industrial electronics have been more open to complement their test strategy with rental and leasing services as opposed to relying solely on purchasing new test-and-measurement equipment.
This has been observed especially in the developed markets of North America and Europe, but demand for such services also is growing internationally in Asia (notably in India and Southeast Asia) mainly due to the globalization of operations of companies headquartered in North America and Europe. In North America, which is by far the largest market globally for rental and leasing services for electronic test equipment, Frost & Sullivan research estimates the revenue share of the rental/lease test equipment market vs. new test equipment to be around 25% in 2015, a market share gain of about three percentage points over the past five years. Provided that the market continues to evolve as it has in the past five years, the share of rental/leasing services in the electronic test equipment market would reach 28% by 2025. In Europe, market leaders expect as much as 30% of test equipment to be supplied through operational expenditures in 2025.
Courtesy of Frost & Sullivan
Demand drivers
Key factors driving organizations to rent/lease electronic test equipment include term requirement length, economic uncertainty, technology evolution, and lower cost of ownership.
- Term requirement length
One of the key factors driving customers to opt for renting test equipment is the length of the term requirement. If the time for which the customer will need the equipment is short, customers are more likely to opt for renting the equipment rather than buying it. - Economic uncertainty
Economic downturns bring incredible pressure on global manufacturing companies and drive an increased focus on capital expenditures. This is especially true for test-and-measurement equipment due to the high price tag of the instruments. Unless the usage of the test equipment is highly critical, customers prefer renting. Rental services have found greater acceptance across industries due to the flexibility renting provides companies in terms of terminating a service contract when needed. - Technology evolution
Technology across industries evolves constantly. In some industries such as wireless communications, this trend is especially acute. Customers are looking to use the latest equipment available, driving demand for renting/leasing services. - Lower cost of ownership
There has been increasing awareness about the cost of ownership of test-and-measurement equipment. Organizations now realize that the cost of ownership goes beyond the acquisition price of the instrument. Renting/leasing the test equipment eliminates associated costs such as calibration and repair expenses.
Vendor selection criteria
While renting/leasing is an essential component of practically any test strategy, vendor selection is critical to ensure success. In North America, key service providers include Electro Rent, TRS RenTelco, Continental Resources, Microlease, and Test Equity. Each company has its own philosophy, strengths, and weaknesses.
Key competitive factors include inventory availability, product quality, delivery time, and, of course, price. A large rental fleet featuring popular brands such as Tektronix, Keysight Technologies, Anritsu, Rohde & Schwarz, Fluke, and others is a determining factor for success in this marketplace.
Investing in new test equipment to offer the latest and greatest products to customers is vital in the rental services market for test and measurement. Equipment availability plays a key role in customers’ rent vs. buy decisions. Maintaining a current rental pool of equipment requires a healthy financial situation as well as an efficient mechanism to dispose of test equipment no longer (or less) in demand. Rental service providers must monitor demand trends to refresh their rental inventory constantly and excel at identifying future demand trends to invest accordingly.
Prompt delivery also is essential to effectively complete in this market. With the advent of ubiquitous connectivity, the web platform of rental service providers also offers them a competitive edge, making it easier for customers to access the information and instruments they need to rent/lease.
About the author
Jessy Cavazos is industry director, Test & Measurement, at Frost & Sullivan.