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Sep 21, 2012

Developing markets reluctant to rent equipment, prefer buying

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Engineering|Africa|Aggreko|Generator|Generators|Rental|Rental Equipment|Safety|Africa|Europe|North America|South Africa|United Kingdom|Energy|Equipment|Maintenance|Rental Equipment|Rental-Equipment|Service|Services|Solutions|Standby Power Equipment|Turnkey Solution|Turnkey Solutions|Martin Foster|Power|Operations|East Africa|Southern Africa
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Global temporary power provider Aggreko has recognised that many companies in developing countries still prefer to buy, rather than rent, standby power equipment, despite the numerous benefits of renting the equipment, especially during times of economic difficulty.

“If you look at the more developed markets, such as North America, Europe and the UK, the pendulum is swinging the other way. There, it’s all about outsourcing and bringing specialists in,” says head of local business in Southern and East Africa Martin Foster.

He identifies two possible reasons why developing markets are reluctant to try rental ser- vices. Firstly, he notes that there has not always been a viable alternative to buying equipment and that specialist rental com- panies, with attractive rates and a full 24-hour service operation, were rare in the past.

Secondly, developing markets have also been resistant to change. “If buying has worked for them all these years, why should they change the way they do things now?” says Foster.

Depending on the country and the target market, it typically takes up to five years for Aggreko to move a market from an outright purchase mentality to recognising the advantages of renting standby power equipment.

Companies eventually start to realise that they do not have to own a generator, which entails many hidden costs, such as insurance, maintenance fees, spare parts and ancillary items.

Renting, however, lowers capital expenditure and reduces a company’s risk; companies will also not have to deal with the problem of unused equipment during periods of downtime.

“It’s also the rapid availability and flexibility of renting from companies like Aggreko that makes it appealing,” says Foster. “By providing a turnkey solution, our customers are always at ease, knowing that we will be readily available if anything goes wrong.”

Aggreko also has in-house engineering capabilities to supply its turnkey solutions, with all the right equipment avail- able on a 24/7 basis. This is also important with regard to safety.

“A customer who has opted for outright purchase doesn’t always know what needs to be done to maintain a generator or what it requires when problems arise. This could lead to critical failure,” says Foster.

With renting, however, maintenance need not be a worry for the customer. Should complications arise, Aggreko will take responsibility for it.

Similarly, where an emergency power supply is required, Aggreko can step in within hours, or within weeks if the power requirement is substantial, adds Foster.

He points out that scalability is another key factor that makes renting preferable to buying because, as companies change, so do their power requirements.

In such cases, Aggreko would replace a generator with a more appropriate model, whereas buyers would have to buy a new generator to remain in line with increased or decreased power demand.

“Moreover, when a company no longer needs our services, it can simply request that Aggreko remove the generator from the site.”

Companies, therefore, save on capital and are not left with an unused generator, which would not only collect dust but could also pose a safety hazard.

In South Africa, many key customers and new clients that bought generators during the 2008 energy crisis have been approaching Aggreko.

“Many of these generators have either been poorly maintained or were bought from a questionable source. Companies that have call centres or critical operations are stuck in a situation where the generator doesn’t work when they need it to. It’s at this point that they approach us to start managing their power,” explains Foster.

In a statement released in November last year, Aggreko reported that situations like these would ensure that rental equipment was likely to remain more attractive to customers globally, even as the world economy strengthened and entered another positive growth period.

Despite the current economic uncertainty, Aggreko maintains that many companies are likely to decide that owning standby power equipment may not be worth the hassle.

Edited by: Chanel de Bruyn
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