Power of 3 is a quick snapshot of tech knowledge delivered in three bullets allowing for consumption in three minutes or less.
The technology budget in many businesses is a sore subject. Technology can be expensive, it changes all the time, and it isn’t always easy to maintain. More and more CFOs and controllers are involved in the technology buying process and instead are advocating to consume technology through monthly payments–and for good reason. A company’s cash is best invested in activities that will provide a return on investment, like hiring, marketing and advertising, or inventory.
We recently surveyed more than 500 IT buyers who have leases to find out why they prefer monthly payments. Here are the top three:
3. More Affordable
My wife and I live near a big, beautiful park and a couple times a week we’ll put our son in the stroller, grab the dog and take a walk. Inevitably we pass up a beautiful house for sale that we talk about someday owning. They usually have the little fact-sheets in the yard about the home, so we’ll grab one. When we see the big price tag our reaction is how expensive it is, but those fact sheets also do a rough mortgage calculation. A lot of the time that monthly payment is only a few hundred dollars more than what I’m already paying for a mortgage, and I know that amount is within my budget. Monthly payments allow you to have your cake and eat it too. You don’t have to worry about doing a big project in phases over a few years, because you can gain the competitive advantage today, and pay for it over time.
2. Easier to Keep Technology Current & Updated
There is a saying in Iowa that goes, “If you don’t like the weather, wait 5 minutes.” Technology these days feels a lot like that and the benefit is that monthly payments are giving businesses the opportunity to update their technology more frequently to maintain a competitive advantage.
In our survey, an owner of a global insurance 500 insurance company said, “leasing allows us to replace every two or three years with updated technology.”
1. Consistent Budgeting
The number one reason businesses we surveyed choose monthly payments, is to have a consistent budget. With the unpredictability of technology, a monthly payment plan gives you a predictable way to pay. Plus, businesses are able to upgrade their technology when it makes sense, and not just when they are able to get a lump sum budgeted for a tech refresh.
“I prefer not to own the equipment, but to rent it to maintain current technology at a manageable and regular cost,” said survey respondent Michael Payne, CTO of Cadence International.
Other reasons businesses told us they prefer monthly payments include not having enough cash on-hand, reducing ownership risks, and not wanting to own the technology outright.