WHEN FINANCING TECHNOLOGY, should channel pros urge customers to go with a loan or a lease? The answer might be neither, since emerging financing-as-a-service products can make a deal easier to land and produce a recurring revenue stream to boot.
With traditional loans, a customer arranges financing, securing funds against equipment. After paying off the loan, the customer owns the servers, workstations, or anything else free and clear.
However, ownership may not be a good idea, according to Greg VanDeWalker, senior vice president of IT channel and services at GreatAmerica Financial Services. “As business needs change, the technology may need to change as well. The end user should be thinking monthly payment for solutions,” VanDeWalker says.
“We’re seeing a large trend among end customers to not want to buy and maintain their technology anymore,” notes Kelly Carter, vice president of financial solutions at distributor Ingram Micro.
A lease may be a better choice for such buyers. With a lease, the customer rents equipment for a set term and price. Ownership and maintenance of the technology stays with the supplier. At the end of the lease, the technology can be refreshed.
Customers often prefer an arrangement like this because of its certainty, according to Carter. “They’re looking for a solution where there’s a monthly payment [and] they know what that payment is going to be,” she says.
For channel pros, the loan versus lease decision has taken on a twist because of new financing-as-a-service options. VARs and MSPs can now often provide customers a one-stop approach, for instance, with equipment, services, and financing bundled together for one price. This has the benefit of removing an obstacle to completing a transaction, as the customer need no longer deal with both a technology supplier and a financing source, GreatAmerica’s VanDeWalker notes.
Ingram’s Carter says that customers may have specific ideas about how financing should be done, so flexibility is important. But with the right approach, a financing-as-a-service arrangement enables end users to enjoy the benefits of swapping out old technology for new on an ongoing basis.
“They are going to continually get equipment refreshed without having to manage it themselves,” Carter says.
The financing-as-a-service model can also ensure that channel pros receive a recurring revenue stream, instead of a large lump sum. Adjusting to this change in cash flow takes planning, however, as does developing a financing strategy instead of relying on ad-hoc deals. For those reasons, Carter recommends consulting financing experts.
GreatAmerica’s VanDeWalker encourages channel pros to adapt, because the landscape is rapidly evolving toward an equipment-financing-as-a-service approach.
“It is definitely moving more toward this,” he says. “Technology is driving this discussion because so many things are going to a subscription/consumption/whatever-you-want-to-call-it model.”