Making the Most of Tech Investments; Total Solution Financing | Equipment Finance Advisor

Featured in Equipment Finance Advisor, August 2019
By: Mark McGovern, President, Commercial Finance, DLL

We live and work in a world where ‘tech begets tech’. What do we mean by that? In a technology consumed and driven society, technology that enters the market creates, develops, and identifies a niche for more technology. This creates a seemingly never-ending cycle and need for updating or replacing technology. Cycles that last 18 months or less generate the need for flexible, end to end solutions that provide dealers and resellers options.

Technology permeates every industry; from healthcare administration to food production, to building construction. The concept of renting technology for a period of time and upgrading is not foreign. It also helps keep pace with technology developments across industries. Corporations rent software licenses, digital equipment and space in data centers. Schools rent computers and tablets for students. In turn, manufacturers and dealers of technology offer end to end solutions to get inbound lines of technology distributed to businesses and into the channel.

According to the Equipment Leasing and Finance Association (ELFA), one of the top 10 acquisition trends for 2019 focuses around the sentiment of preventing obsolescence as a top priority for capital spending. The organization’s 2019 Equipment Leasing & Finance U.S Economic Outlook research states, “Equipment finance businesses across all industries will seek out new technologies for everything from enhancing the end-user experience to increasing efficiencies to managing obsolescence.”

For example, IT departments are consistently and more frequently faced with the challenge of replacing obsolete equipment and software. Expensive IT management costs are increased if new tech is not introduced. Costs for supporting increased service calls associated with maintaining out of date technology is an ongoing challenge. According to the IDC US Leasing and Financing Survey, the two most important factors for IT decision makers related to leasing equipment in the future are; the ability to lease or finance new IT equipment and reducing costs.

Now more than ever, breaking the mold in financing technology makes more sense. Companies are adopting use-based models that allow them to bring new hardware or software into their infrastructure with less risk and more control over costs.

Flexibility and new approaches are needed to keep up
This ever-changing consumption model requires financial offerings to have flexibility for customization and a foundation of customer centricity. Flexibility from an operations perspective as well an upgrade perspective is where decision makers are focusing when making IT investments. One way to minimize risk when making these investments is to partner with dealer or VAR that can offer a variety of financing options at different parts of the supply chain.

Financing software licenses, relieves organizations of the burden of an upfront capital investment on upgrades. Paying for software in installments allows for more accurate budgeting and financial planning. Cloud offerings are also now making it easier to plan, invest and refresh investment focus when making infrastructure spending decisions.

School districts are encouraged to make technology literacy a priority and have adopted increased use of technology that can facilitate communication within the district, among educators, parents, and students. Conversely, business technology needs and requirements are not the same across companies or industries. Having options is nearly a must in today’s world. That should remain consistent with financing. The ability to develop custom solutions for businesses and their customers is something decision makers now require.

Finding an end-to-end solution
IT Managers are tasked not only with sourcing the proper devices, services and infrastructure equipment, but also maintaining it for users and cycling through upgrades. Financial solutions partners need to offer an end-to-end solution that supports the needs of an organization from procurement through usage, upgrades, and disposal or purchase. IDC research on leasing and financing states more than 50% of IT equipment is returned versus buying or reselling.

“Supply chain finance enables companies to unlock resources trapped in their supply chains. It can also give their suppliers the ability to more effectively control their finances by getting cash exactly when they need it,” according to Robert Murphy via Forbes Magazine.

This is where a financing partner needs to align and keep pace by utilizing state of the art systems to conduct business and support supply chain needs. It is becoming more and more important for partners with various funding options that help improve cash flow, freeing up the businesses cash to be used on other objectives, strategies, and projects.

Regardless of the company strategy and decision on how to allocate and use technology, whether it be to return, buy or resell, total solution financing is becoming a requirement. Today partners look for solutions that include: inventory finance, leasing and managed equipment services (MES) to IT asset disposition services (ITAD), standard asset management, and insurance.

In today’s fast-paced and shifting market, having a total solution financing partner is key to optimize business decisions, operate with less risk, and accelerate business growth.