Clever IT financing discussed at Orange Business Live 09
Unsurprisingly, managing business IT costs has been a popular topic at Orange Business Live '09, as enterprises are forced to walk the tightrope between reducing costs and maintaining quality of infrastructure.
The danger is that for CFOs looking to control spending, IT will be seen as a support function rather than a strategic investment, and therefore suitable for cuts. Possible outcomes can include the shelving of new programmes and delays to infrastructure "refreshes", with businesses opting to make-do with their existing kit.
Unfortunately, delayed or postponed investments can have an impact on a businesses' ability to function, at a time when IT could provide a way of maximising productivity in a difficult prevailing business climate.
Speaking at the event, Erich Koller of Orange Business Services and Norman Hoppen of Deutsche Leasing, suggested leasing as a potential alternative, with this providing certain characteristics which may prove appealing to hard-pressed CFOs.
For example, upfront CAPEX costs are reduced, asset depreciation can be removed from the balance sheet, liquidity can be preserved through reduced cash spend, and innovative payment models can be supported, including holiday periods, pay-as-you-use, pay-as-you-can, and pay-as-you-save.
In addition, for some cases, a sale-and-leaseback options may be available, enabling businesses to gain the most liquidity from assets.
The analogy given was the company car: here, leasing is normal practice, with the car not seen as asset for the business to have on its books.
However, the feeling among those gathered is that leasing is an extraordinarily complex, with a number of attributes needing to be considered, including tax implications, accountancy best-practice, and ensuring that the terms of the lease are attractive to a business going forward. A number of criteria need to be assessed, including capital expenditure, operating costs, depreciation, and disposal costs, in order to ensure that leasing is the best option for all of the parties.
Undoubtedly leasing can provide very real benefits for businesses, but it is not an "easy fix".