Masten Evans, managing director of Livingston, the equiment rental specialists, talks to Electronics Weekly about British engineering culture, companies managing their assets, and the greatest test activity he sees over the coming 12 months...
1. What do you feel are the main challenges that test engineers currently have to face, and how does Livingston look to help them?
For a number of reasons it is getting increasingly hard for companies to predict what their medium/long term test needs will be, putting any investment made in this area at risk. It is often unclear how frequently a particular piece of kit is going to be utilised over its operational lifespan.
In many cases, it is hardly used after the initial project it was purchased for. Furthermore, when buying in new equipment the additional costs involved (such as maintenance, calibration, storage, transportation between sites, and finance repayments) are not always taken into account. So as well as the amount of use that a piece of equipment will get being overestimated, the total cost of ownership is actually underestimated. Working with a test rental specialist like Livingston allows companies to treat test equipment sourcing as an operational rather than a capital expense, only paying for it while it benefits the company.
2. Has the recent economic downturn had any effect on how companies deal with test equipment sourcing? Do you think that rental is being perceived in a more favourable light now?
Yes I think the current uncertainty has made rental more attractive, as it gives companies the means to circumvent the acute financial hazards already discussed. There are, for example, major risks for subcontractors called in to install/test new network infrastructure for clients. If they have to invest heavily on test hardware, but then the project is delayed, down-sized, or even cancelled, they could be left with equipment they won’t find use for elsewhere and depleted their funds unnecessarily.
By choosing to rent, the firm would only make outlay on the equipment while a project continues, establishing a direct link between stocking this equipment and being able to draw income from its use. Also clearly smaller companies and start ups can’t make the large upfront payments required for access to cutting edge equipment, but rental gives them the opportunity to reap its rewards regardless of their cash resources.
3. Is the British engineering culture intrinsically adverse to renting equipment though, preferring instead to go down the ownership route whenever possible? If so how do rental companies go about changing this mindset?
Certainly a lot of people still feel direct purchase is the only way to get access to up to date equipment, but conversely many of these have bad purchasing experiences in the past. Europe sees a smaller percentage of its test activity being served by rental than North America, and a lot of effort is needed to change this mindset.
In partnership with the equipment suppliers we have developed the Easy-2-Source offering so that customers can rent for a fixed period, then receive a rebate should they wish to purchase the equipment. This means they get all the advantages of renting in terms of avoiding financial risk, but with the money they pay still forming the basis of a longer term investment.
4. What would you say are the lessons that have been learnt by companies with regard to managing their assets and making sure these are better utilised during their operational lifespan?
The inventory management aspect of Livingston’s business is expanding, with many companies now using this service. We collaborate with a number of blue chip multinationals on this. Outsourcing these activities allows the company in question to concentrate on its core business, not wasting time or human resources on the logistics. It also means that equipment is utilised to the fullest degree, so that they get the maximum possible revenue out of their inventory.
Companies do not have to concern themselves with tracking, maintenance, transportation, or calibration issues. In addition, it lets the company make money back on the original purchase through redeployment of older equipment. If necessary Livingston can also deal with equipment disposal once it is no longer of use to the company. What makes us unique is that it can provide both equipment rental and equipment management services.
5. Where do you expect to see the greatest test activity over the coming 12 months?
In wire-line communications, we expect further progression of triple-play, as consumers demand more bandwidth for an increasing array of multimedia services, not just traditional and voice and data. Livingston has already been deeply involved in next generation fibre network rollouts in countries across Europe.
We are also seeing greater potential for rental in RF/microwave, and envisage this continuing in 2010. The emergence of LTE and city-wide Wi-Fi will bring many test challenges that may be best addressed by renting in the short term.
As industry standards and protocols change at a rapid rate there can be issues as to whether purchased test equipment will be out of date before it has been able to make a full return on the initial outlay. This means companies need more flexibility so that any alterations in their testing requirements don’t leave them stuck with obsolete equipment and having to find the funds for further purchases.
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