Its the perfect time to consider new IT investments

Updated: Dec 3 2012, 08:05am hrs
Sapan jain

While financial markets are still volatile and uncertain, liquidity is still tight, and there is a shortage of funding, and higher funding costthere is a glimmer of hope. Enterprises big and small are getting more innovative to finance their IT, and looking for new financing sources and quicker return on investment (ROI).

The challenge is financing institutions are averse to unsecured loans. Many traditional sources of credit like banks are reluctant to fund IT, seeking additional collateral against loans and

financing deals. Besides, banks and brokers, generally do not possess sufficient IT industry knowledge to make accurate assessments of fair market values, and may cover their risk with increased financing rates.

Significantly, financing is one of the biggest challenges for SMBs today, often limiting their success. This is vital as India is estimated to have around a million SMBs, segmented into micro (1-10 employees), small (10-100 employees) and medium-sized (100-1000 employees).

Interestingly, given the changing technology landscape and growing business needs, SMBs want the same thing as large enterprise clients: value and innovation. They are also facing the same challenges as larger enterprises. What they lack is the resources to address those challenges.

The good news is with the economy starting to reboundsmall and mid-sized companies are central to the forthcoming recoveryits the perfect time to consider new and innovative IT investments to help businesses grow. How can they preserve cash for core business needs while gaining a competitive edge How can they harvest better ROI while keeping competitive edge Can they spread out payments over time, and have flexible payment terms to match their unique budget requirements How can they finance IT

Finding the right answers to the above questions and embarking on the right strategy can spell the difference between success and failure. Smart CFOs break the code to improve the ROI and advance smart financing solutions, including leasing options to acquire technology even during the tough times. These decisions today would be seen as pivotal in positioning their companies for growth during the inevitable rebound in the global marketplace.

By financing their IT investments, enterprises of all sizes can increase their efficiency, and better manage cash flow and assets, by turning large upfront costs into affordable monthly payments. This helps accelerate their ROI, and preserve cash and credit lines for core business requirements.

From financing green datacentre to providing environmentally-compliant disposal of retired IT assets, smart IT financing can help support the companys green strategy in a way that cuts costs, increases cash flow, and better aligns upfront costs to anticipated project benefits. This enables intelligent financial decisions at every stage of the IT lifecycle from the planning phase through equipment disposal. Besides, customised financing options can provide enterprises the financial agility to capitalise on new opportunities and accelerate business transformation, while lowering the costs. This can help enterprises stretch tight budgets, innovate continually and position the business for faster growth.

Often, in a credit crisis customers tend to do one of two things: Either they rethink their entire IT acquisition strategy in terms of how to best conserve cash, or they defy the downturn, investing heavily in a new and more efficient technology to best position themselves for the inevitable turnaround of the global marketplace. Some customers do a little of both. A good financier is adept enough to play in either arena.

In the first scenario, customers redirect capital to more core investing needs and work fiercely to preserve existing credit lines. We have found that where customers in this camp may have once been prone to purchasing technology outright they have made a 180-degree shift to leasing. While banks traditionally do not lease, leasing affords a number of options that could be beneficial in our current economic climate. Leasing allows enterprises the opportunity to acquire technology with low or no money down, followed by regular and flexible, low monthly payments over a 2460-month period.

In the second scenario, for enterprises that see todays challenging times as an opportunity to get ahead of the game, the current economic situation is a perfect time to get rid of older and less efficient technology. Stepping upto newer equipment that is less costly to run, energy-efficient, and with additional functionality and storage capability will probably go a long way in positioning a company for leadership and greater market share when the dark economic clouds lift.

In the long run, either scenario can be beneficial. The most successful companies are those with a finance team that can deftly tie together both concepts: managing costs, while simultaneously investing for future competitiveness.

Besides, organisations are taking various green approaches to reducing expenses. A far greater number of organisations, large and small, from across all industry sectors are now looking to leasing as an alternative for raising their capital requirements.

Moreover, when a leasing customer repopulates its existing hardware with newer energy-efficiency technologiessuch as the latest-generation processors or storagethe lease can be restructured to take advantage of the enhanced residual value that comes into existence when a base system is upgraded to a new technology.

An increasing number of organisations are turning to refurbished hardware as an alternative that can meet their needs at a lower price point. This used equipment is also a green solution in that there is the avoidance of the energy and materials used and the carbon emissions generated if a new product had to be manufactured.

Uncertain economic times indeed require flexible funding alternatives. Its up to companies today to herald in dynamic financing solutions to put their businesses on track, outfit their data centers and meet their technology objectives with dynamically responsive infrastructure. The end result will be the opportunity to reap the benefits of total IT lifecycle management support for a companys dynamic infrastructure from planning to acquiring, managing and retiring phases.

The customised financing options can provide enterprises the financial agility to capitalise on new opportunities and accelerate business transformation, while lowering the costs. Certainly, this can help enterprises big and small, stretch tight budget, innovate smartly and position the business for faster growth. A more collaborative approach within the industry and innovation ecosystem including the government can facilitate a vibrant economy.

The writer is country executive, IBM Global Financing, IBM India/South Asia