The Current State of Technology Financing
According to a recent study by IDC, the IT leasing and financing market is forecasted to reach $260.3 billion by 2021 at a compound annual growth rate (CAGR) of 3.7%. This may come as a surprise since financing has traditionally been kept separate from technology decisions. Discussions around financing were previously dictated by accounting or tax treatments, and financing was only used when a company needed to boost sales upfront.
We are clearly transitioning to a new state of financing; one that is blending with the technology life cycles in its early stages and is more closely aligned to the usage of technology.
There is no doubt that businesses across the world have excelled because of technology financing. It provides a source of funding that is diversified from bank lines and other sources of financing, which not only provides financial benefits, but also helps companies better leverage their resources. Technology financing also allows more flexibility in terms of technology life cycles, and enables companies to be faster, nimbler and less locked in to their choices of technology.
As we transition to a new state of technology financing, customers will continue to turn to their trusted financial partners to help them through IT transformations, with a mix of traditional and new procurement programs.
Over the next 10 years, we can expect to see financial services, and technology financing specifically, revolve around the customer and consumption experience rather than lowering the cost of funds. The use of technology and customer experience will be much more prevalent than it is today, as customers will continue to rely on the flexibility to consume wherever and whenever. We anticipate that users will no longer think about financing as a standalone service, but rather a service that is fully integrated into the technology life cycle and tied into the consumption economy.
How can companies manage the demands of today’s evolving IT market dynamics and meet the ever changing financial requirements?
It will be increasingly important to monitor return on investment on monthly subscriptions and consumption expenses. Consider, for example, the trade-off between ownership and leasing. Companies should also closely observe how they run their budgets between finance, IT and lines of businesses to make sure all consumption and IT expenses are captured appropriately. The need for agility, flexibility and transparency will further integrate financing into the technology life cycle, which will accelerate through and beyond 2021.
Navigating customer relationships can be challenging, but Cisco’s Lifecycle Advantage can guide you through every stage. To learn more about our partner and customer experience life cycle, as well as our digital engagement program, check out this video