Rebounding from the recession, the rental industry -- and by extension, the rental management software category -- offers a number of vertical niches and IT opportunities for solutions providers.
The American Rental Association (ARA), which represents the owners of equipment rental businesses, projects the total equipment rental revenue in North America to reach $38 billion this year. That represents a 6.2% increase compared with 2012. The U.S. market is expected to grow 6.5% this year compared with 2012 rental revenue, outperforming the nation's overall GDP growth rate of 1.5% to 2%.
An uptick in commercial construction contributes to the rental market's improving prospects, according to an ARA spokeswoman. A rise in commercial building projects increases the demand for heavy-equipment rentals. The fast-growing energy sector also fuels rental growth, since drilling companies are renting more equipment.
The rental industry covers considerable ground. In addition to heavy-equipment and drilling gear, companies specialize in cameras, tools, and party and special-event supplies. Rental firms may use Intuit Inc.'s QuickBooks for accounting and spreadsheets for managing their assets, while others rely on paper-based processes and email. Channel partners targeting the rental space offer integrated systems, often built upon an enterprise resource planning (ERP) system.
Moses de los Santos, managing director of Armada Dynamics Corp., said his business is up 30% to 40% year over year. He said people are renting more instead of purchasing, coming out of the economic downturn. Armada Dynamics is based in Oslo, Norway, and has an Americas operation. The company's equipment rental software offering, which is built on Microsoft's Dynamics NAV ERP software, may be installed at the customer's premises or via Microsoft's Azure cloud.
"Rental is up," de los Santos said. "You don't have to put out as much cash outlay."
Indeed, rental customer interest has reemerged following a period of limited investment in IT.
"There was a lot of hunkering down and 'Let's weather out the storm,'" said Tommy Williams, ARM channel manager at Automated Rental Management. "Now we are seeing more activity occur for these rental businesses -- and a lot more time and effort put in -- as they look to find new systems and new tools that will help them leverage their businesses."
Automated Rental Management, based in San Antonio, partners with Sage North America to provide its rental management software. The system operates as a module of the Sage 100 ERP product.
Energy has emerged as an important vertical for solutions providers. Many companies in the oil and gas industry are opting to rent rather than purchase equipment, a change from past practices. Accordingly, rental companies have emerged to cater to that industry.
At Armada Dynamics, de los Santos said his company has seen quite a few deals in the oil field services area. He said companies in that space view renting equipment as a way to control their costs. He cited medical equipment as another active market, adding that the heavy-equipment vertical has started to gain momentum.
Serrera Consulting Group, an IT and management consulting company, has sold its rental management software to heavy-equipment and camera rental customers among others. The company's rental system is built on NetSuite's cloud-based ERP platform.
Overall, Sererra is ramping up its rental industry business and plans to focus on different segments within that sector, producing turnkey systems for individual niches, such as party and special- event rentals, said Chance Berry, business director for NetSuite at Sererra.
"The rental industry is really getting big," Berry said.
Rental companies looking to improve their systems and processes have quite a shopping list of needs. In general, companies are looking for automated systems for inventory control, scheduling customer rentals, managing billing, calculating depreciation and keeping tabs on equipment maintenance.
Specific niches have particular IT hot buttons. Heavy-equipment rental firms may emphasize maintenance tracking, for example. Such companies may also want to implement a system that lets them take advantage of rental market metrics, Automated Rental's Williams noted. And there's a fit between rental metrics and the nature of the heavy equipment sector. Williams said ARA's rental performance metrics are specific to serialized assets -- those that require a serial number. Heavy-equipment assets tend to be serialized.
Party supply rental companies, on the other hand, have a different set of priorities.
Those companies, compared with heavy-equipment rental firms, possess a large number of assets that aren't serialized. Williams said party supply rental businesses need help managing high transaction volumes.
"They need to turn inventory quickly from one event to another event," he said.
In addition, party supply specialists may also require sophisticated change order management systems. Such systems help rental companies cope with last-minute additions to an event's guest list, for instance. The ability to accommodate order revisions in a timely manner lets rental firms minimize the number of deliveries they have to make, Williams said. Multiple deliveries cut into a rental deal's profitability.
In general, a desire to improve inventory visibility appears to be a common driver in the rental space. A rental firm needs to carefully track what it has on hand and when items are due for return, so it can schedule new rentals. Those issues prompted Sererra to develop its rental offering. "We had a lot of companies that had the problem of selling it and bringing it back in," Berry said.
Rental companies may prove greenfield deployments when it comes to comprehensive IT systems.
Oil and gas equipment rental companies are relatively immature in their use of formal business processes and IT systems compared with other verticals. Automated Rental's Williams said some companies in that field manage their assets and billing rather loosely, neglecting to document the movement of equipment, for example.
Smaller rental firms may use QuickBooks and other disparate systems that don't communicate with one another, Armada Dynamics' de los Santos said. He noted, however, that some companies now seek systems that handle quoting, invoicing, returns, rental asset management and accounting in a single, integrated system.
Williams said his company also encounters disparate systems among rental companies. Some will use QuickBooks and repurpose Excel into an inventory management system. Information tends to become fragmented. An integrated system, however, can help organizations improve their reporting capability and provide useful data for executives, he said.
"They can make better business decisions, not based on gut feel," Williams said.
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