Flexible Consumption: The pay-per-use generation

Flexibility is fast becoming the defining trait of the modern business and, as a result, companies are looking to adopt innovative new IT strategies to improve their operations. For well-established firms, this often leads to conversations about implementing new infrastructure and applications to transform their organisations and keep up with the ‘young blood’ digital start-ups entering the market for the first time.

 

This is all well and good, but these companies – operating on traditional infrastructure ownership strategies – are continuing to focus so heavily on obtaining the technology itself, that they go straight to the bank without considering other options. What they don’t realise is that digital transformation isn’t just about the data centre. Today’s marketplace offers businesses so many additional options over traditional banks. With flexible, tailored technology financing packages, enterprise customers can find better solutions that provide the vital benefits, whilst delivering the greatest efficiency in terms of cost and resource to maximise productivity and return on the investment.

 

CIOs may think: “I’ve always worked with a bank, I trust them, why would I mix my IT with my finances?” The world, however, is increasingly focused on bespoke offerings, so suggesting that companies switch from owning and managing their own assets to leasing infrastructure and software platforms is becoming the more sensible option. The rise of the leasing trend is clearly evidenced in the 2015 Finance and Leasing Association study, where ?29 billion of leased goods were provided to the private and public sectors in the UK, representing almost 32 per cent of the UK’s overall investment.

 

So how do CIOs explain this option to the CFO? Financial executives have long favoured operating expenditures (Opex) over capital expenditures (Capex), as they enable the subtraction of small manageable amounts from company revenues at the time that the charges are incurred. The majority of businesses have traditionally elected for Opex payment systems to cover staff wages, floor space rental and telecommunications services. The advantages of this model can’t overlooked by IT departments, and CEOs around the world are starting to realise the benefits of this approach. Today, innovative flexible financial models for technology have become the most effective method of managing investment in innovative software and infrastructure to improve the capabilities of the wider organisation.

 

The facts: Capex vs Opex

Before we ask CIOs to approach their CFO or CEO and demand a new payment option, it’s important to understand the history of why payments have been managed the way they have and how flexible models are helping businesses to succeed in today’s market. Companies used to opt for a Capex model as it was the only option in the traditional marketplace when enterprise technology was starting out and people couldn’t afford a single computer, let alone a complete network. It offered total control over purchased infrastructure and any data or information stored on it and allowed businesses to earn profits over and above the initial cost of the product once it is paid off.

 

But as technology has evolved, the environment has become infinitely more complex. For many of today’s businesses the best option is to lease hardware, cloud and hosted infrastructure in order to get operations off the ground or have the capability take down a new entrant. Companies working with innovative flexible models have far greater flexibility, are able to scale up or down on resources to ensure they can meet demand when necessary and also cut back to save costs where possible. Financial services contracts often include maintenance, servicing and support as standard, meaning that customers have a safeguarding policy should they require assistance with mission critical data and applications. Most importantly, however, financial services agreements are attractive to everyone involved in the investment decision. The CFO gets a manageable and predictable outgoing for a core service – which does not result in ‘losing’ money on owned assets – whilst the CIO gets more tech for his or her buck. The organisation as a whole can then benefit from IT infrastructure that is always up-to-date and capable of handling the demand, even in a dynamic market environment.

 

The implementation: How does flexible financing help with technology?

The current appetite for enterprise technology is insatiable. The rapid evolution of devices and software means that new products are plentiful, but also that customers are fighting to stay ahead of the pack. Businesses are therefore keen to make use of the very latest solutions’ capabilities to accelerate their route to market and better satisfy their consumers, if they can afford the investment.

 

Practically speaking, the CIO cannot afford to buy the newest hardware or upgrade software every time a new version is released and historically, it has led to businesses making do with older, inferior solutions. With such rapid advancements in the technology industry, it’s now possible for IT infrastructure to become obsolete within only a few years. This, of course, leads to more costly investments down the line in the attempt to keep up with advancing competitors and regain a strong position in the market. The financial services model enables businesses to access the best solutions immediately for a lower short term cost which can be afforded through ongoing revenues earned from daily trading and operations. With contracts, solutions are always kept up to date and once the term is up, it’s possible to upgrade to a new infrastructure without breaking the bank or losing money on degraded owned assets.

 

The results: Tailored technology packages

The key to offering financial services is to ensure there is something for everyone. Organisations of all shapes, sizes and requirements can benefit from customised financial plans which allow them to build or simply modernise their IT infrastructure. In a Capex world, it was the big firms that won out, with the ability to invest funds in expensive enterprise technology. However, with financial services, the playing field is more even and small businesses are able to access the market, utilising innovative flexible finance models initially and building on their infrastructure as they grow. That doesn’t rule out larger businesses, which have the option to provision capacity to be activated when needed or even to deploy flexible scaling, whereby capacity is increased or reduced on demand.

 

The one thing is certain: The development of technology will continue to accelerate. For business leaders and IT directors, it’s no longer viable to make do with outdated systems and software. Today’s market is characterised by rapid change and the resulting demand requires increasing flexibility and scalability to be able to cope on a shrinking budget. Therefore, in order to climb up the ladder or even just to stay in pole position, businesses must ensure their IT infrastructure is capable of handling demand and keeping up with the competition. With so many benefits - increased control for enterprise, reduced commitments to solution vendors and unparalleled flexibility and scalability for current and future operations – flexible financing is making the very best enterprise technology available to businesses of all shapes and sizes, enabling growth and continued profitability in a dynamic and highly competitive market.