Acquiring IT hardware and software is one of the most exciting, most terrifying things you can do as a growing business. But while all roads hopefully lead to ‘happily ever after’, there are several routes to take.
This humble blog post hopes to educate you on the various ways you can go about acquiring IT.
Buying IT for cash
The first option, and seemingly the most straightforward, is to simply buy it cash. To use an example, Joe Soap Ltd needs new laptops. Joe Soap Ltd sends one of its people to Laptops-R-Us to purchase Acer Aspire Intel Core i5 Notebooks; they pay about R100 000 writing a cheque or using the company overdraft and wander back into Joe Soap Ltd later that day with the new laptops.
Of course, the majority of companies may not want to outlay this kind of cash, preferring to use it for other non-fundable uses such as acquiring new staff or marketing projects. In this case, they need to get the money for their IT hardware from somewhere else…
Funding IT from a bank
Companies with good long-standing relations with a certain bank may consider acquiring IT by financing it through a bank or extending their existing lines of credit to do the same. This may be a good option for those strictly wanting to acquire IT hardware and who have financed such things through their bank many times before, making it the most familiar and well-rehearsed process.
However, there are several downsides to acquiring IT in this manner. Bank finance only covers tangible assets, which means that Joe Soap Ltd can only get hardware such as laptops, desktops, printers and servers financed. The bank won’t finance ‘non-tangibles’ such as software and acquisition, licenses, implementation, customisation or training for this software.
Banks also have a long, arduous and very strict approval process for even the most loyal customer, sometimes taking weeks to approve the finance for the IT that Joe Soap Ltd desperately needs as soon as possible. If Joe Soap Ltd has an existing line of credit with that bank the process may (but quite probably won’t) take less time to approve, but Joe Soap Ltd may want to keep these precious lines of credit to be extended for a future emergency or a pressing future need that cannot be funded any other way.
Lastly, the business needs to consider the fact that with banks’ financing, part of the agreement with the bank is end-of-term ownership, much like car finance. This means that at the end of the financing term, Joe Soap Ltd is going to be stuck with depreciating IT hardware taking up space that they most likely have to upgrade all over again. They need to consider how often this outdated tech will really get used past its life span.
Renting IT
There are rental finance options…
Rental finance can be a convenient way to mitigate cash outlay and still get all the IT hardware a business needs. It can provide cashflow, convenience and control. It is usually over a 36 month term. IT rental from these companies includes sourcing, supplying, financing, insurance, management of the IT and delivery. This makes rental finance a practical and hardworking solution that is popular with busy, dynamic companies looking for a one-stop fix that doesn’t require them running in between 5 different shops.
100% Software Finance
Software Finance is a solution which allows businesses to acquire their new and/or improved software in a more cost-effective way – through modest, predetermined payments to the financier every month. It operates much the same as an IT hardware rental agreement, but you will own this software at the end-of-term. Software finance can apply to enterprise-wide programs such as CRM and ERP, niche/specialised software, software-as-a-service (SaaS) and even web, general and mobile development. Software Finance may include acquisition, licenses, implementation, customisation and training.
These are all viable methods for acquiring IT that work differently for different businesses. The best possible solution is to get educated on the specifics of each one in order to walk away with that new IT, as well as with your business finances and your dignity intact.
For more information please visit: http://ww3.spaceage.co.za/spartan-financial-services
