Guide to Financing Technology

Computer equipment acquisitions are no longer driven solely by economic factors
Today, more than ever, financial managers, buyers, contract administrators and computer users are faced with a new set of factors when considering technology acquisitions. Computer equipment acquisitions are no longer driven solely by economic factors. Instead, other influences and their impact must be considered, because the risk of owning yesterday's technology has never been greater. The useful life of equipment has never been shorter - and the same rules used before in evaluating whether to lease or purchase information technology equipment probably no longer apply. Sourcing, maintaining and replacing expensive IT equipment can be time consuming and costly. If you are looking to invest in IT equipment, or perhaps want to overhaul your existing technology infrastructure, it pays to know what the current market trends are and what they will be in years time. You will also want to find the most efficient way of channelling your IT budget to best fit your business needs.

How can I get the most out of my IT budget?
Buying from leading retailers. The largest PC stores can offer a wide selection of the latest IT at attractive prices. However they are generally aimed at the small office home office (SOHO) market and will not meet medium-sized businesses and large enterprise supply requirements in terms of price, volume and support. Buying from manufacturers and Independent Software Vendor's direct. Some PC manufacturers such as Dell, HP allow you to configure and order PCs and servers online and offer a range of purchase or leasing packages alongside. The ease of arranging these packages can meet the needs of some businesses, but you need to consider carefully the true costs of the finance agreement and the cost of additional services and warranties, the profits from which are often used to hold down the cost of the equipment itself. Asset finance. Depending on the size of your IT expenditure the right asset finance provider can offer you a complete solution for all your needs, from sourcing the right equipment at the right price, to matching your long-term needs with market trends and helping with upgrades and disposal. Even if your annual spend is relatively small, an asset finance provider can often help make sure you get the best finance deal while allowing you the flexibility to choose your own vendor.

Leasing – financial and operational benefits
Recent years have seen rapid advances in technology, shorter product life-cycles, and significant price/performance improvements. As companies face the need to better control their investment in IT equipment, leasing has emerged as an important management tool for procuring, managing and disposing of these business critical assets. In coming years, the importance of information systems in conducting day-to-day business will continue to grow and its costs will command an even greater percentage of company technology budgets. As a result, organisations will be under even greater pressure to better and more strategically manage these assets. Leasing is emerging as an integral component in helping companies achieve this objective. It will provide you with the flexibility required to keep pace with rapid technology changes while reducing the overall cost of acquiring, managing and disposing of your equipment. Many companies are already leveraging leasing to better manage their equipment and obtain a better return on their investment. As more companies rely on technology for strategic business purposes, its anticipated that an even greater percentage will turn to leasing to help them realise the best return on their considerable investment.

Important considerations
When you seek to finance technology commitments you should consider several factors as you evaluate alternative financing providers. Knowledge of and commitment to the IT market are important. The more the financing provider knows about the market, the better able it will be to understand your needs and add value when it comes to terms and structure. The provider should come to the table with innovative ideas that will benefit you. Commitment can be measured by longevity and staying power through all market and economic conditions. An ability to finance the total solution is key. Without it, you may have to deal with individual financing sources for hardware, software and services and end up with multiple payment schedules and far more complexity than is necessary. The provider should offer flexible payment terms. Most often, payments are structured on a monthly basis. However, industry or seasonal factors may mean that alternative schedules e.g., quarterly or bi-annual would benefit you, and the financing provider should be open to negotiating payment and other terms to provide you with the greatest possible flexibility. Software and services form the largest and fastest-growing part of the information technology market. It is critical when making large investments in technologies you understand the acquisition options open to you and partner with a financing provider who can fund these soft costs and meet your specific needs.

End of life management
Decommissioning and disposing of technology is complex and costly. It's fraught with risk. Data security is a worry. Re-marketing opportunities are limited. The administrative and logistical burdens can be daunting. What does this mean to my business? The Waste Electrical and Electronic Equipment Directive (WEEE) makes your business responsible for ensuring all electrical and electronic waste is disposed of correctly either re-used, remarketed or recycled. This represents equipment purchased by you prior to June 2006. What happens if we ignore this? Financial penalties for non-compliance are severe. How can asset finance help? The right provider can offer end of life services, remove compliance headaches whilst managing both the cost and process of secure asset disposal.

© Capitas Finance 2006