Co-Author: Brian Bahr, Credit Portfolio Manager, Cisco Systems Capital Corporation
Today’s social and economic factors are influencing investment in IT equipment. According to the Equipment Leasing and Finance Association (ELFA), real private investment by U.S. businesses in equipment and software is forecast to be more than $2 trillion this year. This may be surprising, given the state of the economy, but with recent supply chain issues, the lingering conflict in Europe, and China’s emergence from lockdowns, companies are desperate for equipment that wasn’t readily available to them as they worked through their digital transformations over the past few years. While businesses may struggle to justify expanding budgets in today’s economy, the combination of financing options, a supply chain resurgence, and a heightened security threat landscape are incentivizing businesses to invest in equipment that is long overdue.
A Hybrid Approach to Uncertainty
Residual effects from the pandemic and the need to offset the impact of recent layoffs will also spur demand for IT equipment. Many businesses terminated their office building leases during the pandemic to eliminate unnecessary expenses. While many companies may return to the office in some capacity, many transitioned to being fully remote to reduce expenses. Now that economic uncertainty is growing and so many of us have acclimated to remote work, it’s an obvious decision – for some – to get rid of office space and continue to work in either hybrid or remote environments. Reducing or doing away with these significant costs allows businesses to reinvest a portion of the savings into the equipment necessary to maintain a hybrid environment, such as computers, software, office, and communications gear, as well as automation tools, which reduce the dependence on labor.
Supporting Sustainability and the Circular Economy
As businesses look to manage risk and reward, they are turning to flexible payment solutions to finance equipment that allows them to continue their digital transformation jour ney and navigate today’s IT threat landscape. In fact, the ELFA predicts that in the year ahead, more than half (55%) of equipment acquisitions will be through financing, with protection from equipment obsolescence, tax advantages and cash flow optimization being the top drivers for end-users to leverage payment over time. With sustainability top of mind, many businesses are also looking to remanufactured equipment, which allows businesses to get the products they need at a lower price point and support the circular economy.
IT financing is designed to provide businesses with the freedom to acquire the technology they need to grow and react to changing market needs. Revenue is often unpredictable during economic volatility, and it will be vital for businesses to align their expenses with their revenue – and to adjust capital expenditures for growth when they need to, as well. At Cisco Capital and Cisco Refresh, we strive to provide businesses with the opportunity to continue to grow within budget, all while navigating micro and macroeconomic trends.