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Access, not ownership: financing software in the channel

Ownership does not have to be the be all and end all according to Tristan Watkins, CEO, BNP Paribas Leasing Solutions UK

One of the defining characteristics of the modern consumer is the reluctance to commit to a purchase. It’s hard to blame them. Why pay £600 for the latest iPhone when it’s guaranteed obsolescence within a couple of years? Why buy a DVD when you can see the movie – and thousands more – anytime you like on Netflix?

With this in mind, it’s unsurprising that the idea of a “subscription economy” for software has become more attractive to businesses. When you can pay for no more than what you actually use, it’s much easier to get the most out of your technology.
If you’re a software reseller, you might feel somewhat hesitant: taking cash in drips and drabs isn’t much use when you need the lump sum to sustain your business. Nonetheless, it’s entirely possible to adapt to this model over time by adopting a hybrid “software-on-lease” system at the outset.

Rather than attempt to move to a 100% cloud-based offer on day one, your funder will provide you with the money you need upfront – enabling your customer to benefit from an affordable cost per month price, whilst you see revenues on day one. There are several competitive advantages in doing so.

Value for money
Resellers are invariably stifled by budgets: their own, and their customers’. For the former, it can be hard to fund a subscription-style model without digging into their own pockets. For the latter, capital expenditure limitations often make paying for a full-price version of a brand-new application financially unjustifiable. With annualisation becoming a widespread industry practice, there’ll likely be a new edition out within 12 months. Why not hold out for something slightly better?

It’s a mindset that often leads to customers working with slightly outdated (if not entirely redundant) software. If you offer software-on-finance, you can supply affordable access to the best possible version of these products at the customer’s convenience – a valuable proposition, and one likely to increase the possibility of repeat custom. You also benefit from the fact that the leasing company manages credit control and pays invoices – lightening much of your financial load and absolving you of unnecessary responsibility.

Tailored services
No two customers are precisely alike, and it can sometimes feel like enterprise software deployments were invented to prove it. A product that works brilliantly for one business may well be an awkward fit for another. The customer may need help with the install. They may not have the correct hardware. Perhaps every user needs specialist training. When they buy outright, this support isn’t always included at first, and it’s seldom included on an ongoing basis.

When you offer software on lease, you’ve got more latitude to throw in add-ons like equipment, training, installation, and whatever else the customer requires. The à la carte model makes you more attractive to your target audience – and at little practical disadvantage to your business.

Flexibility
Successful businesses always outgrow their technology. Any divorce, however, tends to be protracted and messy: obsolete software has a habit of digging its claws into existing processes, becoming harder and harder to remove and replace. Equally, businesses may need enterprise-level software on a project basis, but find themselves having to commit to a big purchase for something they’ll stop using after a month or two.

The lease model combats this inflexibility by allowing companies to upscale at will. Whether you need one extra license or twenty, it’s usually possible to quickly add an extra lease schedule. Customers appreciate this level of control: it makes sure they’re never spending money on things they won’t use.

It’s not a perfect system, of course. Every lease is a commitment, and as a reseller, it’s good ethical practice to ensure that your customers fully understand its terms and can reasonably make their payments. Making sure they consult their accountant – or a third party accountant – before they sign is a reasonable first step, for example.

On the whole, however, the software on lease model represents a means of reaching a wider, modern, more prudent audience that is increasingly comfortable with the 'as a service' route. If resellers hope to get ahead of the pack, they would do well to adopt it.

This was last published in September 2016

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