John Foulston has had an offer of UKP1 for a used 3081 mainframe rejected by IBM UK. The chairman and managing director of Atlantic Computers Plc made the offer in response to IBM’s attempt during the fourth quarter of 1986 to find bidders for 16 secondhand 308Xs. His disdainful attitude towards IBM was supported at last week’s Asset Finance and Leasing Digest conference entitled Computer Leasing: The Shape Of Things To Come. His attitude was endorsed by United Computers managing director Meriel Winwood, who accused IBM of putting the machines out to tender solely to gauge market pricing by our bids and win leases on 3090s. She said that all the machines were customer-owned ones that IBM had offered to trade in for new 3090s and that IBM’s problems in unloading the machines was symptomatic of its approach to the secondhand market.
IBM doesn’t have a clue
IBM Europe doesn’t have a clue about running a leasing company. It is already facing the problems it has created through its foray into leasing, and will soon be forced to seek a rapprochement with European brokers and leasers as it has done with the CDLA – Computer Dealers and Leasers Association – in the US. Eventually, she believes, IBM will have to leave the market to the independent lessors while it concentrates on a product strategy that would allow it to compete efficiently with the likes of DEC and Japan Inc rather than looking at by-products, such as leasing, of a market it already has. Even without IBM, Ms Winwood, a vice-president of ECLAT – European Computer Leasers And Traders – and president of ECLAT UK, says the leasing industry has a number of actions it must take to ensure the success that we know is achievable. We have to be accountable, we must create and support our own self-regulatory bodies such as ECLAT by developing industry standards and codes of ethics and we must look more seriously at creating accounting standards so that we can be measured in criteria comprehensible to our investors. Later speakers including John Fleming, vice president of Security Pacific EuroFinance Inc, and Colin Mudd, managing director of Rental Systems Ltd, part of Combined Lease Finance Plc, agreed with Winwood that IBM was becoming more aggressive in its behaviour in the market. All referred to huge discounting on 4381 where, said Ms Winwood, we have seen some deals go down that would not pay out over six years!. Fleming said that such aggression from manufacturers would become commonplace and would have a substantial impact on future residual values. He said that leasing was increasingly being perceived as a important financial management tool and would soon be recognised by financiers as a standard form of asset finance. In a succint address on sales aid finance, Colin Mudd said that the renewed interest in this type of finance would lead to markets for non-IBM equipment developing and would help inject a new, and long overdue, sense of realism on margins. Sales aid schemes are not suitable for all, he declared, and asked whether providing only finance for the hardware really amounted to sales aid leasing when, at least in the minicomputer environment, hardware rarely accounts for more than a third of the costs of an installation? He warned the lessors that their views were not always in accord with suppliers, even those they were working with directly. In honesty, how could they be? The supplier wants to sell more equipment without impacting on his margin. The lessor would like to be reasonably sure of getting his money back hopefully with a profit. The IBM leasing community in the UK is, along with the Pick-popping sector, the most gossipy part of the computer industry in this country. It is usually not difficult to find companies willing to slag each other off and make actionable comments about their rivals, but at the conference the leasers were all trying to get on with each other and so reserved their venom for IBM, and IDC – the International Data Corp market research company that provides most of the industry with residual value informa
tion. John Foulston, from the chair, and others from the floor, said that IDC, instead of predicting future prices was, in fact, directing them with its forecasts. This charge, and another from Meriel Winwood that IDC Europa’s information seemed to be entirely based on opinions of the company’s US analysts, was rejected by Mike Schorfield, IDC Europa’s director of financial services. He said that his company’s reports were based on views and statistics gathered in individual markets and were intended as an aid for leasers and suppliers, not a replacement for judgement. He accused some lessors of trying to influence IDC predictions because their residual value accounting methods were not all they should be. He also said that it was fallacious for lessors to believe that without the IDC reports they would be able to charge customers higher prices.
IBM plans keep changing
He pointed out that no major user is a subscriber to our service. Schorfield courted further controversy with his statement that the European market is comparatively homogeneous. This was rejected by the unlikely double act of Foulston and Ms Winwood. At lunch, delegates were addressed by PH Nichols, financial services manager of IBM UK. He said that stories that the leasing company, a wholly owned subsidiary of IBM UK, did not, contrary to popular mythology, receive account lists from the main company telling it who to, or not to target. We get chased by IBM for money as much as everyone else and have to abide by the same rules as our competitors. He said that in its first three years in leasing, IBM had learned that there is nothing like doing it one self. One of the most difficult lessons was to realise that it had to take outside advice and provide customised finance. And, for those who chomp at the bit trying to work out what products IBM has in the pipeline, Nichols had some consolation: knowledge of IBM’s future product plans is often confusing and distracting, especially as the plans keep changing.