Wednesday, February 21, 2024
CEOWORLD magazine - Latest - CEO Journal - 6 Reasons to Consider IT Financing

CEO Journal

6 Reasons to Consider IT Financing

Information technology (IT) assets are becoming one of a company’s largest and most strategic investments. By financing your IT effectively, you can deliver significant value to a company’s cash flow statement while preparing for increased agility in the future. 

Through strategic financing you can boost your company’s cash flow, better insulate your company from financial fluctuations and reach your operational goals. Yet these are not the only reasons you should consider IT financing. Reflect on these additional reasons financing your business’ technology resources is a smart move.

  1. Financial Predictability. While certainly related to improving cash flow, IT financing’s ability to increase budget and investment predictability can also deliver significant business value. When the business can have a better view of upcoming expenses and have confidence knowing that technology investments are distributed more evenly across the year, it provides greater leeway for other strategic investment needs. By supporting better budget predictability, IT financing can help the business potentially lower cash reserves which are often carried to cover unexpected investment needs. These reserves can then be redeployed for other high-value areas such as staffing resources or stocking products.
  2. Easier Technology Refreshes. IT infrastructure advances change frequently, as do business demands for technology. A purchase made one year can be quickly obsolete just three years later, causing an unexpected need to double down unexpectedly on technology investments. By financing technology purchases, businesses can distribute the investment just across the useful life of the technology they need. This frees up the opportunity to refresh the environment more frequently as business needs dictate without heavy upfront outlays.
  3. Save Money on Maintenance. Technology maintenance costs can be a large portion of your overall technology budget, particularly when you need to hold on to technology infrastructure longer than its useful life, because the upfront investment to replace it is too expensive. By using IT financing, you can lower overall maintenance on the technology you use, because often you are only placing it in use during the period of time maintenance is offered by the vendor. Thus, you avoid the heavy maintenance agreements often necessary to keep technology in place beyond its typical lifespan.
  4. Annualize Discounts. Many times, new enterprise software and hardware purchases are negotiated to include significant discounting. Nice! Money saved! However, often discounts are offered for just a certain period, such as the first year, then go back up for subsequent years. By using IT financing, you can annualize these discounts across the term of the financing, again creating greater budget predictability and keeping investments steady across the term of your deal.
  5. Improve ROI. By lowering maintenance costs, benefiting more from discounts, and improving refresh cycles using IT financing, you are also enhancing the total return on investment for your technology purchases. This better ROI also enhances your company’s ability to optimize its use of technology innovation and may increase IT’s ability to deploy additional technology to further other strategic priorities.
  6. Avoid Manufacturer Lock-In. Traditional IT purchases are designed to be “sticky” so that you are more apt to remain with the same vendors, contract after contract. They often bundle technology from the same manufacturer so that businesses are compelled away from choosing best-of-breed solutions from multiple vendors. It also often means that IT teams a forced to remain on technology that isn’t quite what the business needs, simply because the contractual agreements have them stuck. By using IT financing from a neutral third-party source – not the manufacturer directly – businesses have greater control over their technology decisions. The financing party enables the business to select the combination of solutions they deem to be best for their business needs – rather than choosing a solution wholly from one technology manufacturer. This helps businesses remain agile and frees them from manufacturer lock-in challenges that can often lead to further increased costs.

IT financing is a valuable tool for any business looking to future-proof their operations. When looking for the best financing solutions, look for a technology-neutral expert who can help you best outline your priorities to better your company’s cashflow, security, and much more.

Written by Doug Hulett.
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CEOWORLD magazine - Latest - CEO Journal - 6 Reasons to Consider IT Financing
Doug Hulett
Doug Hulett is Director of Veristor Capital and an expert in IT financial consulting, including technology refresh plans and cash flow management strategies.

Doug Hulett is an opinion columnist for the CEOWORLD magazine. Connect with him through LinkedIn.