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At DesignCon, I spoke with Rachael Lee, Western regional manager of Electro Rent. This company rents out test and measurement equipment like oscilloscopes and spectrum analyzers—machines that can cost six figures to purchase.
In this interview, Rachael explains how the company operates and why certain companies choose to rent test equipment for the long term instead of buying.
Andy Shaughnessy: How are you doing, Rachael? Nice to meet you.
Rachael Lee: Nice to meet you too. I'm doing pretty good. We're enjoying the show.
Shaughnessy: You’re the local sales manager, correct?
Lee: Yes, I handle Northern California and the Pacific Northwest.
Shaughnessy: Give us a little background on Electro Rent.
Lee: We're the largest rental equipment provider in the industry. We've been in business since 1965 and we're a global company. We ship test and measurement equipment all over the world. We pride ourselves understanding the true cost of test. We are asset management company.
Shaughnessy: Right. Well, this is great idea.
Lee: As long as HP/Keysight have been making equipment, we've been renting it side by side.
Shaughnessy: Right. So, tell me how this all works and explain some of the advantages of renting.
Lee: This equipment can be costly. We rent application-specific solutions. So, if you're testing PCIe or doing a board design, you will need very expensive equipment, rather than having to buy the equipment and take on ownership and all the hidden costs of ownership. Instead, you can come to us and pay per use. We encourage our customers to rent more and buy less.
Every three years, newer test equipment comes out with better connectivity, and people who have bought this equipment are getting stuck with it. After three to five years, they can't use it anymore. Our business model allows you to always have the latest equipment for your test and measurement needs and when you're done with it, literally pack it up and ship it back.
Shaughnessy: That sounds like a good deal.
Lee: It is. You no longer need to buy your equipment. You just use your op-ex funds and expense it.
Shaughnessy: I know that some of this equipment runs over $300,000, and you may need a couple of them, so a small company might not be able to foot the bill.
Lee: Yes, and it's crazy how fast the technology changes. Just a few years ago here at DesignCon, all the BERTs on display were 32 gigabits, and now they're all 64 gigabits. So since the technology is changing, it really doesn't make sense to own this type of equipment.
Shaughnessy: How does it work if I want to rent some equipment by, for example, Keysight?
Lee: We're partners with all the leading brands. They support us in representing their equipment where we're authorized. Each brand comes in and authorizes our lab to calibrate and service our fleet. When you're renting a piece of Keysight gear, for example, you can feel confident that we've calibrated the equipment using the same standards that Keysight themselves would have used. It’s the same automation calibration programs used to get the equipment serviced by the OEM. In many cases, Keysight has stations in our lab to calibrate and service our fleet because our fleet is so large. We carry all the large brands, and they partner with us to help us manage the fleet of rental equipment.
Shaughnessy: It sounds like you have a rental fleet, like Enterprise Rent-a-Car for equipment.
Lee: We are a lot like a car rental company. Unlike Enterprise, who won’t help you drive, all of our rentals come complete with technical support. We give you pre-sale and post-sale support. We do everything except make your measurements for you.
Shaughnessy: When somebody rents, do you take it to the customer and show them how to use it?
Lee: We did that prior to COVID, and we hope to get back in front of customers soon, but right now we're doing it all virtually. Hopefully soon we'll be back in the labs and assisting again.
Shaughnessy: That's great. What is the typical rental period?
Lee: We can do anything from a short-term rental, like a one-month project, all the way up to a 36-month operating lease. Someone who knows they want to keep their equipment on-site for the term, for the duration, will get a 36-month lease. They'll keep it three years and at the end they'll opt for a technology refresh, like leasing a car.
Shaughnessy: So, you could just have it there basically permanently, and then every three years trade it back in for a new machine?
Lee: Right. When you have the equipment on long-term lease and it needs calibration, we send our team in to calibrate it onsite. You never need to have down equipment.
Shaughnessy: The maintenance is built in, right?
Lee: Everything is included, like technical support and the maintenance. If you're renting for a short term, we ship it to you, calibrate it, accessorize it, and help you learn how to use it. Then you ship it back at the end of your project.
Shaughnessy: In your booth it says you ship equipment around the world.
Lee: Yes, to 185 countries. We’re shipping to almost every contract manufacturer you can think of right now.
Shaughnessy: It makes so much sense. It makes you wonder why people buy this incredibly expensive stuff.
Lee: Often, it’s because that's the way it always was. People don't think about renting. But once you start renting, you'll never stop. It’s an efficient way to get the latest equipment and not have to deal with a lot of problems. You’ll never say, “This piece of equipment is five years old, and it has slow connectivity. It's slowing down my tests.” It’s a great way to keep engineers in all the new toys.
Shaughnessy: That's great. Where are you based?
Lee: We're headquartered in Van Nuys, California, but we have sales offices around the world.
Shaughnessy: You mentioned earlier that you have $1 billion worth of equipment on hand. That’s something.
Lee: We do. We have $1.2 billion worth of inventory. Not everything's available right this minute, and a lot of equipment is out on rent, but you'd be surprised at the amount of inventory that comes and goes every 36 months.
Shaughnessy: When someone gives equipment back after three years, what do you do with it?
Lee: We sell it refurbished, which also makes us like a car rental company. We have the largest rental fleet and the largest used equipment available in the industry.
Shaughnessy: I'm trying to think of the downside here.
Lee: People say, “Oh, well, in three years I could have owned it.” That's the biggest objection we hear. “By the time I paid 36 months of rent, I could have bought it.” Sure, that's true. In some cases, you could have paid for the sticker price, but don't forget all the hidden fees, the technical support, the property tax, the sales tax, the maintenance, calibration, repair—all these things. These hidden costs are one and a half times the purchase price. When you factor all that in, if you don't own a piece of equipment for five years, you're losing money.
Shaughnessy: Right. And then after five years, it’s going to be at end of life technologically.
Lee: Right, you’ll want to trade it in anyway. Then you've got to pay someone to dispose of it. You know how many companies have storage rooms full of unused equipment because it's too slow now? It becomes a problem. Ownership can be a burden.
Shaughnessy: So, it’s all test equipment?
Lee: Yes. Oscilloscopes, BERTs, spectrum analyzers, signal generators and network analyzers. We also do telecom equipment and systems level testing protocol testing.
Shaughnessy: Well, it sounds like you really enjoy your job. That's great.
Lee: I started here right out of college and I'm still here. I've been here 22 years.
Shaughnessy: Rachael, thank you. Great talking to you.
Lee: Thank you, Andy. Nice talking to you too.