Finance today has to deliver on the needs of the complete supply-chain, as its role becomes the facilitator of a middle-ground between capital purchase and pure service or consumption business.
The market is in a period of transition from traditional product procurement to a service-based model. Consumption of IT products and services is proving popular for many organisations of all types and sizes, has many advantages over capital-hungry purchases, and is fuelling the rise of Managed Service Providers.
However, the capital purchase, product supply heritage of the market goes back a long way and is entrenched in much of the supply chain and its people. Navigating these choppy, transitional waters is not straightforward and as service provision becomes ‘productised’ through ‘cloud’, ‘managed service’, and/or ‘as a Service’ offerings, we find that many of these are based on terminology rather than the underlying terms. This is creating significant confusion within the channel and with the customer, and is negatively impacting the perceived solution value and ultimately slowing adoption rate.
Customers want ‘as a Service’ and partners to be ‘at your service’. In a transitional market, the two do not necessarily equate. Consumption-based is not necessarily the same as committed regular payments. Traditional leasing and lending that has been a common offering for decades in the IT space (among others) does not enable the move to a true service economy. But what is the alternative? If significant capital outlay, and associated cash-flow issues, are to be avoided then finance with flexibility is needed that reflects a products capacity rather than the product itself, incorporates Right to Use concepts, covers all elements and parties of a deal and has structured flexibility built-in.
Finance in these circumstances then moves away from being an overlay function used when required to enable transactions and becomes integrated in to the product sale as the enabler of a more service-based deal that delivers on the needs of the complete supply-chain, without compromising transparency and customer service. The role of Finance today is the facilitator of an efficient middle-ground between capital purchase and pure service or consumption business.
There are Finance products that meet these needs but in order to be successful there needs to be a change in the way they are proposed and managed throughout the sales and delivery process. Finance needs to be present at the customer needs evaluation meeting and not wheeled in at the eleventh-hour if customers are to be clear about what is actually being provided and the benefits to them from ‘as a service’, and partners being ‘at your service’.