Demand for technology solutions has been booming as the world goes through digital transformation. However, faced with growing demands alongside the pressures resulting from the pandemic, technology vendors are increasingly looking to integrated financing to help them navigate this period of change and uncertainty and to maintain sales momentum.
The question remains, which financing partner will provide the best support in the current situation – because not all financiers are alike. In this article, David McCoubrie, Head of Technology Finance at Siemens Financial Services in the UK, takes us through what he believes are the five essential added-value insights that an ideal financing partner should be able to offer to technology vendors in these challenging times:
Digital transformation is well underway. Even prior to the current crisis, both public and private sectors were undergoing a major shift towards a more digitalised world. Public services are grasping digital technologies to deliver more for less in smart cities and communities. Retailers and hospitality firms are now connecting their people with machine intelligence and online data to offer better customer service. Likewise, large and small manufacturers are boosting the need for additional technology power as production lines, maintenance workforces and supply chains become more digitalised. All this is driving demand for technology infrastructure and application software, services (increasingly cloud-based), and the devices that connect systems with people. Indeed, the pandemic has even become a key driver for digital transformation. The crisis has accelerated companies’ digital transformation plans by a global average of six years, and a UK average of 5.3 years.¹
When upgrading to new digitised technologies and digitally enabled products, customers want to conserve their capital, pay as they go, be tax efficient and budget reliably, all of which is enabled by smart financing. For technology vendors, integrated finance is, therefore, a key factor to enable sales. An ideal financing partner will draw on a wealth of funding knowledge to offer a range of flexible solutions, each designed to support sales and enable customers to acquire the best technology solutions for their needs.
Whether you’re already working with a financing partner or simply considering its value as part of your sales offering, it’s important to know what’s available and how to get the most from your provider. Here are our top-five questions to ask your financier to ensure you’re getting the most from the arrangement:
Insight #1 – Is your financing contract performing? You’ve worked hard with the financing partner to hammer out the T&Cs and to establish a service level agreement (SLA). But is the business flowing through as expected? Using their smart finance platform, the financing partner should be able to give a quick answer to any queries that your procurement, finance or general management pose.
Insight #2 – What’s your direction of travel? This is where the financing partner can tell you what’s hot and what’s not in your product portfolio – essential business intelligence. They will be able to give you a breakdown by product, by sector, by sales team, and so on. They’ll help you prioritise sales effort, and tell you which segments are in growth and which is decline – especially in terms of profitability.
Insight #3 – Are there any exceptions? This is where the financing partner spots exceptional patterns – whether adverse events or short terms opportunities – so you can act quickly. Financing data provides triggers to investigate why exceptions are occurring, such as: a competitor’s introductory discount campaign that’s eating into your sales; or an economic event that’s slowing investment; or where demand for a product is going into decline because of a technology phase shift.
Insight #4 – What should you worry about? Here the financing partner is raising more long-term issues that may affect your business – possible future shocks. That is really topical as vendors negotiate the current turbulent markets. Business volumes might look healthy – even growing – for parts of your business, but they may not be generating real value. Your financing partner can help you implement the age-old saying – “turnover vanity, profit sanity.” They should be able to help you understand where your margins are holding up and where they are eroding, helping to avoid strategic pitfall.
Insight #5 – What’s coming over the horizon? Your financing partner should be providing you with specialist knowledge and advice about any financing and regulatory changes that may affect your business and/or your customers. A good example is updates on legislative changes.
Picking the right financing partner can make all the difference for technology vendors - surviving the crisis and thriving thereafter, especially at a time when digitalisation has taken a leap as companies adjust to the ‘new normal’. A smart financing partner provides business intelligence that really helps a vendor build their business.
1. Computer weekly, Covid-19 accelerates digital transformation by over five years, 16 July 2020