Software Financing – A Changing Landscape

  June 12, 2014

  Read Time: 1 min 45 sec

As both equipment dealers and technology vendors adapt to their rapidly changing markets, the convergence of diverse technologies is driving these evolutionary trends. One area where convergence—along with fundamental technological advances—is readily apparent is in the software that companies use to run their businesses.

Mission critical software has long been an integral part of virtually any company’s operation, regardless of size or industry. Although most office equipment and technology vendors do not sell or directly support such software applications, it is often included in a solution bundle. The vendor develops a hardware configuration, and then partners with a software vendor to actually implement the total solution.

One benefit of this model is that the entire solution can often be financed as a package. This is convenient for the customer since it requires only one monthly invoice and one monthly payment. The finance company typically handles all of the billing issues, so the vendor at the heart of the solution enjoys a reduced administrative burden as well. An added benefit is that selling a turnkey, packaged solution has been proven to be an excellent means of establishing long-term customer relationships while building significant loyalty in the process.

For both office equipment dealers and technology vendors, implementing comprehensive solutions and then financing them as total packages is an excellent go-to-market strategy. Revenue can be increased even more by providing support for these solutions through an extended managed services contract. An additional selling point for a managed services offering is that the entire contract can often be financed as well.

The software landscape is changing however. Cloud computing is well on its way to becoming the gold standard of business computing, even over the rising protests of internal IT departments. The fact is that when virtually all of a company’s software needs can be provisioned through the cloud, there is a rapidly diminishing need for in-house computing resources. In terms of cost, cloud computing solutions are typically billed on a usage-based monthly subscription, which scales based on demand.

This changes the way that office equipment dealers and technology vendors should think about their customers and about the solutions that they are providing to them. Cloud-based software solutions will soon need to be integrated into the total solutions that are provided to customers, which means that software—at least the purchase of it—will be excluded from the package. The Bring Your Own Device (BYOD) model will also have a potential impact by reducing the amount of hardware that a customer needs to buy.

On the other hand, cloud computing opens up a whole new market, for both office equipment dealers and technology vendors by supplying and supporting the cloud-based software providers. Cloud solutions are not the sole province of Google or Amazon, or any other global behemoth. Small entrepreneurial companies with focused, niche-industry software solutions can deliver services through the cloud just as easily as huge, global companies can.  The cloud reduces cost and increases access for both providers and users alike—once the infrastructure is set up and the offering made operational. The opportunity lies with helping software providers to come online.

The bottom line is that cloud-based solution providers can be a very profitable market for both office equipment and technology vendors. Over the next several years, these companies will be making significant investments in hardware and services as they set up their cloud-based offerings. Vendors who are positioned to meet this demand will be able to capitalize on the tremendous opportunities that the cloud represents.

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