Digital Workplace

Invest in technology without breaking the budget

The digital transformation of business makes innovative payment models such as pay-per-use possible. By relying on a payment method that is based on actual usage, companies can avoid high capital expenditure on IT equipment or on installing and running IT solutions.

The digital revolution is enabling technologies such as the Internet of Things (IoT) and cloud computing. These, in turn, make smart customised business concepts and finance strategies for managing and monitoring technology investments, including pay-per-use, a reality. The pay-per-use model, which is based on actual usage, avoids high start-up costs and years of draw-downs. This takes the pressure off the balance sheet and frees up capital that can be spent on important innovation programs.

Usage-based IT equipment funding

Flexible pay-per-use models that do not impact on liquidity are already well established when it comes to funding IT hardware. Even entire IT estates can be operated on this basis. The model adapts perfectly to the customer’s individual circumstances, providing billing that is based solely on usage.

Companies funding smartphones through pay-per-use can also benefit from a residual value calculation. Based on the list price and the useful life, two years for example, the residual value is then calculated and deducted from the cost. If a smartphone with a list price of £1,000 is used for two years, by which time it is estimated to have a residual value of £200, it will cost the customer only £800 over the whole term.

Pay-per-use provides an ROI from day one

The benefits of pay-per-use are also evident in other areas. If manufacturing companies fund a CNC milling machine or an assembly robot through a pay-per-use model, they can allocate the costs directly to the product. ROI is measurable from day one – unlike a purchase, where it usually takes five years to show a return on investment.

The pay-per-use model simplifies profitability calculation, unit costing, cost centre allocation, and production planning, and provides high flexibility in terms of payment. That is because it is based on the actual capacity utilisation or usage, for example, the number of milling operations per month or year. If capacity utilisation drops, so does the amount to be repaid. If utilisation increases, the payments go up accordingly.

The healthcare sector, particularly hospitals, can also reap the financial benefits associated with pay-per-use models. When the costs for procuring and using medical equipment and technology are broken down to each individual treatment, it is easy to establish customer-based or treatment-based billing. This takes the strain off budgets, which are usually under pressure in this sector.

Criteria for selecting the right partner

Implementing pay-per-use models is quite complicated, whether it is in industry or the healthcare sector. Requirements and costs must be analysed and determined precisely, taking into account the planned useful life and all internal and external resources for operation, maintenance, and remarketing. Flexible contracts that allow the software, IT infrastructure, and IT equipment to be scaled according to requirements are also important. The support of a non-captive partner is crucial on such a project. This partner should have expertise concerning technologies, funding, terms, and services, be able to bring transparency to the technical and administrative processes, and act as a single point of contact for the customer. Experience in payment, portfolio, and service management and comprehensive market knowledge is also crucial when it comes to optimising technology investments based on customised pay-per-use solutions.

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Feel free to contact us in case of questions!

Danny Persaud

Head of Sales - UK & Ireland Corporate

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