AI, Internet of Things (IoT), and hybrid IT require entirely new financing methods

Capital expenditure on IT is a key factor in the ability to innovate, especially for financial services providers. However, the necessary financing measures can have an adverse effect on a company’s flexibility. Our group CFO, Joachim Schulz presents five factors that are crucial in overcoming these obstacles.

The digital revolution in the economy and its effect on processes in companies are becoming something of a nightmare for finance departments, especially in banking. The finance department needs a reliable basis for planning and has to justify its actions to auditors, the board of management, and shareholders. This dilemma requires new approaches and innovative ways of thinking:

Financing models have to match the business, not the other way around.

The digital revolution is bringing lasting change to how we work and make decisions in companies. Departments demand – and are granted – a far greater say in capital expenditure as they need to implement new business models quickly in order to remain competitive. The IT department is both the driver of innovation and the service provider that delivers the structures for implementation. Financing models that may have been suitable 20 years ago, such as standard leasing and hire purchasing, have become obsolete. Lean processes and customised billing models are key. That is why a growing number of ‘intelligent’ and more flexible leasing and financing concepts are becoming established in the market. They give the finance department the flexibility that it would like to offer its colleagues in other departments.

Bringing together the CFO, CIO, and the specialist department is more a question of having the right strategy than good fortune.

Turning these three decision-makers into a single powerful unit is one of the key challenges that companies now face. This is where being agile has its benefits – it not only involves having optimal collaboration on innovation and manufacturing but also agreement on how best to finance them. In this respect, traditional loans of the recent past are hopelessly out of date. 

Long-established finance strategies are wasting the potential for innovation.

There is always a certain amount of risk involved with innovation, and risk is the treasury department’s natural enemy. With standard finance strategies, it is rarely possible to strike a balance between these attitudes to risk. Instead, new approaches can provide a long-term boost to innovation. One example is ‘try and use’, where equipment is supplied with a short-term exit option in case the project does not work out. 

Even non-standard financing models can be managed.

Having a customised finance strategy for each project is only possible with total transparency and maximum control. That is why the means for control must be adapted to the financing structures. A powerful, comprehensive tool for the technical and commercial management of all contracts and services, both in-house and external, is essential.  

Putting financing in place requires external expertise – ideally from an independent partner.

To find the best finance options, companies must be able to compare the market and draw on experiences from a wide range of projects. Very few companies have the experience and capacity to produce such comparisons and benchmarks. Also, you have to account for the fact that IT infrastructure providers are biased – their assessments will always have an inherent commercial preference. Banks often lack the necessary expertise and skills beyond what standard tools can offer. The ideal solution is a non-captive service provider that is able to work with the CFO, CIO, and auditors on an equal footing. It is vital, of course, that this provider works in partnership with, not against, the customer.

Joachim Schulz, member of the Board of Management and CFO at CHG-MERIDIAN

Joachim Schulz, member of the Board of Management and CFO at CHG-MERIDIAN

The IT department wants to be a service provider and driver of innovation. As a result, it is dependent on flexible short-term capital expenditure.

Contact us!

We'd love to hear from you! If you're interested and would like a no-obligation conversation on the best financing method for you, feel free to contact us directly or fill in our short form below.

Declan McGlone

Vice President Finance UK & Ireland

  • Head Office Egham CHG-MERIDIAN UK Limited
  • 65 High Street
  • TW20 9EY Egham, Surrey
  • +44 1784 470701

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