By Tristan Watkins, CEO, BNP Paribas Leasing Solutions UK
A recent survey from Spiceworks indicates that UK IT budgets are set to decline in 2017. There are many different reasons for this: for example, 33 percent attributed it to political and economic uncertainty. Regardless of the cause, however, you can be sure of one thing: large, expensive software and hardware purchases will be harder than ever to justify.
Already, businesses and consumers are moving away from high-value upfront transactions and towards models that allow for regular upgrades, flexibility, and lower commitments of time and money. A customer looking for software will often find it available for an inexpensive subscription: enterprise resource planning (ERP) tools, for example, may be prohibitively costly to purchase on perpetual licenses, but as a smaller, recurring monthly expense, they’re often far more manageable.
What’s more, the model is gradually moving beyond software; having started with SaaS, it’s slowly moved towards Hardware as a Service – HP, for example, offer 24 and 36-month hardware subscriptions – and Infrastructure as a Service, as offered by Amazon Web Services.
It’s gaining in popularity, but while smaller, regular payments may be the best option for customers, it won’t always be viable for a margin-sensitive reseller. How can resellers benefit from this trend without damaging their profits?
They need to embrace subscription models, but they don’t have the cash flow to sustain it. Leasing agreements may offer the best of both worlds: the financier pays the reseller’s invoice in full, but the customer can still pay the financier in smaller, recurring payments. This arrangement confers several advantages on the channel partner and the end-user alike.