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Financing competitive advantage

Emma Thomas, Head of Sales South & Brokers (Vendor Finance) at Siemens Financial Services, explains how smart financing can help businesses meet evolving IT requirements

 Emma Thomas, Head of Sales South & Brokers (Vendor Finance) at Siemens Financial Services

Emma Thomas, Head of Sales South & Brokers (Vendor Finance) at Siemens Financial Services

With today’s accelerated pace of technological change, periodically upgrading IT systems is not just a ‘nice to do’, it’s a business imperative.

According to an IBM global infrastructure study, more than 90%  of large organisations believe that IT is a key provider of competitive advantage. Updating technology is particularly important in highly regulated sectors where change requirements can be mandatory, driven by regulatory, customer and market demands.

Across all sectors, the judicious application of up-to-date technology is becoming an increasingly important competitive differentiator that can have a significant impact on operational efficiency and business performance. Application areas that have a disproportionately large impact on business differentiation include: customer self-service; customer relationship management; management information and analysis; automated decision support; internal knowledge sharing; and mobile workforce management.

The importance of acquiring up-to-date technology is not confined to the IT arena. Office imaging devices, such as digital copiers, optical scanners, high-speed printers and document publishing systems, are equally indispensable.

The acquisition cost of a laser printer typically represents as little as 20% of the total cost of ownership (TCO), with consumables, such as cartridges, maintenance costs and repairs usually making up the majority of overall life-cycle costs. As a printer gets older, these costs tend to increase steadily. Older devices also have higher energy consumption than modern ones that use up to 65% less power.

Asset financing

Despite the need to create a technologically efficient working environment, businesses may not have sufficient capital to acquire and upgrade the technology required.

Even where capital is available, the outright purchase of systems that could fall into obsolescence within a short space of time may not represent a sound investment. Given that affordable bank credit is harder to come by (business bank borrowing has fallen since 2009, according to Bank of England data), companies may also want to avoid tying up capital in technology when it could be deployed better in other ways.

If a business operates in a volatile market where capital reserves may be needed at a moment’s notice for sudden tactical initiatives, such as a marketing/sales campaign or the acquisition of an ailing rival, asset financing provides a cost-effective solution that enables technology investment without tying up precious capital in capital expenditure.

It is a useful option for any organisation that is close to the limit available from traditional sources of finance, such as standard bank credit, as it keeps credit available for other business activities. It also allows businesses to invest their own capital in appreciating assets (property, new ventures, stocks & bonds) where they can see it grow, rather than committing that capital to depreciating assets.

Fixed costs

Asset financing techniques are  gaining popularity as an investment-enabler. The user effectively pays for the use of the technology/system over a given financing period. Costs are spread over the financing term to align with the benefits produced by the acquired asset, such as operating cost savings, greater throughput or improved productivity. This eases the user’s cash flow and frees working capital for business-generating activities. Fixed monthly costs eliminate the volatility of short-term economics including interest rates, inflation, credit conditions and market dynamics.

Such financing arrangements are often offered by original equipment manufacturers (OEMs), equipment resellers and specialist brokers, in cooperation with specialist financiers, as part of a value proposition that encompasses both technology and a financing solution.

Financing arrangements can embrace not only the acquisition price, but also running costs, such as maintenance. In this way, a business can take all operational costs associated with an asset into consideration in its financial planning. A financing contract can also include the possibility of upgrading the technology within agreed parameters at certain points in the financing period. Businesses therefore need not fear investing in rapidly outdated technologies, but can instead harness technological innovations to drive growth.

Financing makes essential IT investments and new office technology affordable for businesses, whether in tough times or in a growing market. Seeing the cost of a system in terms of a monthly payment, rather than an overall big capital outlay, customers can become more ambitious about what they ‘can afford’. It encourages the customer to invest in best-in-class solutions, rather than compromising on second best.

A modern IT solution, supported by efficient office technology, is a prerequisite for every successfully run business. With the help of flexible, alternative financing techniques, companies can take advantage of emerging technology to improve efficiency and streamline processes.

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2018