Company Announcement - Innovation is presently a buzzword in the world of business. For most people it means finding new processes and products which, in turn, often means more computing power. However, these types of upgrades frequently come at a high cost - something to be avoided when the economy is down, competition is tough and margins are thin. But, says Ethel Nyembe, Head of Small Enterprise at Standard Bank, business experts believe that innovation relies as much on an unconventional outlook as it does on accepting an entrepreneurial idea. For instance, common wisdom would hold that a major corporation wouldn’t even think of giving someone selling pre-owned computers the time of day.

Turning this preconception on its head was a recent episode of The Growth Engines, supported by Standard Bank and aired on Business Day TV. It featured financial and healthcare services giant, Discovery, and its SME computer refurbishment and rental supplier, Qrent, highlighting the mutually profitable relationship between the two. Barry Swartzberg, Co-founder of the Discovery Group, says that the business, which touches the lives of three-million South Africans through its health, life insurance, short-term insurance and wellness businesses, prizes innovation. Improving company processes, products and benefits to make the company’s offerings more attractive to consumers are subjects that occupy time at every meeting. 

When ideas become reality, Discovery rewards the innovator, says Mr Swartzberg.

“One of the most significant aspects of our business is computer systems and data. We put an enormous amount of effort into this area. This part of the business provides us with material that we can use for the benefit of the individuals we serve. The cost of these systems is, however, something that has to be controlled,” says Mr Swartzberg. It is here that the interests of Discovery and Qrent intersect.  As a supplier of computer hardware, Qrent has saved the business giant more than R14 million in desktop costs. The major difference between Qrent and other suppliers is that Qrent deals in pre-owned, refurbished computer hardware.

Mr Swartzberg elaborates: “It doesn’t matter what size the supplier’s business is. When we look at suppliers, we assess them on their alignment with Discovery. They need to live the core values that we live, as our appointment of them is tied to how they identify with us. What we look for, especially in our smaller suppliers, is dedication and commitment. We have to see an entrepreneurial spirit - a business case is not the beginning and end of everything.” Selling to a client like Discovery, therefore, means that innovation has to be attached to value.

For DJ Kumbula, CEO of Qrent, innovation dictates that the practice of companies buying new computer hardware for every user regardless of need must be questioned. Driving his contention is the finding that up to 80% of corporate users of laptops and desktop computers never utilise the full capacity of their new machines. With this in mind, there is no reason that a three-year-old refurbished computer shouldn’t be able to do the same job as a much newer model. It usually can, he says, but at a cost that is typically 50% below that of a brand new computer. The source of Qrent’s computers is Innovent, Qrent’s parent company, which rents out new equipment for periods of up to three years. The problem of what to do with the ‘old’ Innovent computers that were well ‘specced’ and had been well maintained, led to the birth of the new Qrent service offering. By adding a warehouse, filling it with technicians who perform 21-point checks on all machines and passing them as fit for service, resulted in a new leasing industry.

With a market that ranges from schools to corporates, refurbished hardware is the answer for those trying to reduce their massive systems overheads. “Businesses are now asking: ‘What is the ROI on my technology investment?’ From our perspective, the biggest challenge preventing a positive answer to this question has been people’s mind-sets. Our proposition is not that our product will do the job for you every time, regardless of what you want it for. We ask our customers to segment their user-base into top, middle and lower- end users. We then match the computer capacity to the user needs. What we are saying is that you should buy what you need and avoid the emotion of buying something that is new and shiny, but will never be used to its full capacity.

We have never had a contract cancelled because our hardware hasn’t been capable of doing what was asked of it,” says Mr Kumbula. In the case of Discovery, Qrent has now supplied them with 4,000 machines. New machines would have set Discovery back an estimated R28 - R32 million. Using the Qrent alternative, Discovery has saved more than R14 million without compromising on output and performance. As part of their contract, the machines contain the software required, and with a three year warranty to ensure reliability. Further, instead of paying for the equipment upfront, Qrent allows its customers to rent the equipment from them and pay a small monthly rental amount, a true ‘pay as you use’ model.

“Taking the need for quality equipment, addressing the corporate cost issue, and offering a full-service package on a ‘pay as you use’ basis are undoubtedly the main ingredients of Qrent’s success. What cannot be overestimated, however, is the timing of their venture. Launching a value-added service during tough economic times, and during a period when people are receptive to new money-saving ideas that reflect positively on their balance sheets, is at the core of innovation,” concludes Ms Nyembe.

The Growth Engines concludes on Business Day TV (DSTV channel 412) on Tuesday 7 July at 9:30pm, with repeats on Wednesday at 10:00am and Thursday at 2:00pm. To view previous episodes and in-depth articles on themes explored on the programme, log on at bizconnect.standardbank.co.za or bdlive.co.za/indepth/growthengines.