Presented by InnoVent

IT financing models are shifting. Is Africa trailing behind?

It’s safe to say that many African countries have a certain fascination with owning their technology. In Europe and America, however, 80% of businesses have abandoned ownership models for more flexibility and agility.

According to InnoVent, the reason for this is that a lot of African businesses follow a traditional business model and are caught up in doing things the way they have done them for many years.

As we’re moving deeper into the fourth industrial revolution where change is constant and escalating, doing things the same way we’ve done them for many years, because of tradition, is imprudent.

There is now a growing need for more flexibility and scalability to meet business requirements on demand. Simply put, you need to keep up with change.

Traditional pitfalls

Traditional business models often follow traditional methods, which come with a variety of pitfalls.

From a financial perspective, owning IT equipment requires a large capital investment, for which companies either need to take out a business loan or use current capital.

When using company savings or current capital as a financing method, the company may experience an impact on its cash flow, affecting other areas of the business which might be forced to take a back seat, impacting growth.

On the other hand, when financing the purchasing of IT equipment through a business loan, there are additional fees such as interest rates, which also contribute to the high-cost of ownership.

Finally, from an operational point of view, as the equipment ages, most companies want to recoup their initial outlay by sweating their assets long after they are no longer operating at their optimum levels, this leads to increased downtime which affects productivity.

Change the way you finance IT

We are starting to see a shift in the tech space where access to technology vs ownership is becoming the preferred method to acquire technology.

This move has been primarily brought about by the growth of the Everything-as-a-service (XaaS) and consumption-based business models which are transforming the business world.

XaaS – “anything” or “everything” as a service represents technology offerings that can be consumed on a pay-per-use model. The same model can be applied to the technology hardware you use in your business.

The pay-per-use model in IT operates as a lease. It’s similar to XaaS, where immediate accessibility, affordability, and scalability are the driving forces.

It allows you to gain access to the technology you need today and pay for the use of the equipment, rather than own the equipment. By using this method, you can save cash and redirect it to other areas in your business.

Many people think that by leasing they’re settling for an alternative, inferior option, because they can’t afford the expenses of owning their IT equipment.

This is not true, equipment leasing employs strategies that ensure the most productivity is gained from the equipment and when it’s time to upgrade, equipment is always kept up to date.

Leasing your IT equipment, lets you acquire the latest hardware at a manageable cost while remaining flexible as your technology needs grow over time

Is Africa ready for this change

While first world countries might have an upper hand, African businesses can keep pace with technology by adopting leasing solutions.

IT equipment depreciates, and buying it upfront will end up costing more – not to mention the added headache of storing and disposing the old assets.

As the continent becomes more comfortable with the concept of not owning physical assets, we are going to experience the growth in expectations towards effortless access to goods and services.

To find out more about leasing options with InnoVent, you can visit the InnoVent website.

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IT financing models are shifting. Is Africa trailing behind?