The virtual leasing company: myth or reality?

The European leasing industry stands at a crossroads. With the introduction of the euro at the start of January, we are seeing greater transparency across the market.

Yet research from Nottingham Business School in the UK suggests the number of true pan-European leasing deals remains fairly small - certainly if you define 'pan-European' as operating in five or more markets.

However, others who define it as operating in three or more markets would see greater growth.

Many of these leasing arrangements might be small, although they have significant longer-term potential.

Such deals are frequently sought by high technology companies with a strong European presence. Because employees of these companies - engineers, installers or systems integrators who work in different European countries - meet regularly to work on joint projects and because they often speak a common language, it's inevitable they talk about company car provision.

This is clearly a situation where problems regarding company cars may be exaggerated if provision is not equitable, or identical, across Europe.

It's also a situation that many a finance director would like to manage more smoothly, and as such may be the catalyst for a change in policy: the kick-start needed to launch a pan-European fleet strategy.

But how well is the leasing sector prepared to react to this demand for leasing across several European countries?

And is it ready to use new technology to offer a virtual leasing service - new software that can provide clients with all the leasing information and back-up they need through a computer.

Of the major pan-European leasing companies, the majority are owned by banks, some are owned by motor manufacturers, in some cases with product restrictions, while others may be part of strategic alliances or partnerships.

But major changes in the market will force leasing companies to seek new cost savings, whether through a more effective operation or through a breakthrough in technology. One of those breakthrough technologies will be that used by a new breed of 'virtual' leasing company.

At this stage, there are few, if any, such companies operating across Europe. But they are just around the corner.

These virtual businesses would take price inputs from local markets, and offer access to their systems through selected service points, while managing the set-up on a virtual basis.

Once the move towards pan-European virtual leasing starts it will be almost unstoppable. At present, the market is in a situation where the only way to grow is through increasing the number of units. Realistically, that is no way to grow.

Proper, sustainable growth cannot come at the expense of cost, quality or client sensitivity. But it may well come through a unique product on a pan-European basis.

And that computer-based product may already be available to provide the forward-thinking company with a way to run its own fleet operations through a virtual network.

So why is no one using it? The problem is that the European fleet operator does not necessarily understand the capability of the new software. This may mean the industry needs extra training, or better quality staff - or it means leasing companies need to look carefully at their capabilities and how they can build such an advantage into their services.

Currently, productivity per employee in the contract hire industry is not high. Across Europe it comes at about one employee for every 150 units in operation - that is a poor figure.

However, according to Marnix Vereecken, managing director of Sofico, the Antwerp-based software house, this figure could be lifted towards 750 units per employee with the introduction and application of its new-generation software.

The power of such new software - the Sofico Miles is perhaps the first to be launched commercially - means that the opportunity now exists for the first true virtual leasing company.

This offers all types of communications features supported by quality inputs of data. That data covers both fixed and calculated costs as well as realtime operating costs, and is capable of generating secure, flexible outputs in the format required by fleets.

Certainly such a communications system requires local, quality inputs, but the system is able to take material in a local common format and translate it into a common format that can, in turn, satisfy local, central, or pan-European requirements.

Given this, it is possible to interrogate the system and build quotes for local provision. Issues of tax and exchange rates can be built in.

Once the quote has been accepted, it is possible, with powerful enough central software, to be able to operate across borders with access for service points that support the system. Information about price, taxes and operating costs for individual countries can be added to the system - giving pan-European capabilities.

The next stage of the virtual leasing company is that of neural networking - dynamic networks that develop over time to take account of developing requirements. Equally, the package needs to be able to take account of local needs and formats.

According to Vereecken, the Miles software can handle such requirements and, as it is developed, more capability and sophistication can be built in.

So what are the strategic implications of this new, powerful software and, more importantly, what might it do for the marketplace?

In my opinion, the new generation of software, exemplified by Miles, could well lead to the development of the first true 'virtual leasing companies' - organisations that have a virtual back office, with inputs, analysis and actions being undertaken electronically, remotely and with total accuracy.

The technology will introduce a new type of leasing company - offering smaller and larger leasing businesses the opportunity to provide leasing resources for clients across Europe, using selected service points to manage that business on its behalf.

This 'hands-off' approach has been a vision for many in the industry for years - but now it may become a reality on a pan-European basis. Vereecken thinks the Miles software could give us just that capability; the only question is whether our minds are open enough to accept it?