Imagine it. You spec out your gear and pay a fixed dollar per month for use of the equipment. At the end of term, you spec out the replacement, tweak the payment and keep on keeping on. Equipment as a Service (EQaaS). But isn’t that what we call leasing today? Well…yeah. But clients don’t really think of it quite that way.
Most end users, manufacturers and dealers still see the process as one of formally obtaining financing where the EQaaS thing feels far more like a “subscription” of sorts. EQaaS opens the door to a whole new way of thinking. More than finance, it would be a total cash flow approach to acquiring, paying for, managing and disposing of equipment. You know…the life cycle management thing…but a truly integrated customer experience. The agreement might even include maintenance, service, asset tracking or other value added life cycle management things. Customers get so used to the operational “subscription” based approach, that haggling over implicit rate or spread is not even a thing.
I know, the operational back end of something like this would require some serious commitment. You’d have to hit the right asset classes for sure, find the right manufacturer partners and a small football team of attorneys to build it. But if you could? Wait, people are building it.
Software as a Service was the start. In some ways that industry exists because finance guys couldn’t figure out a way to make the old license structure affordable with financing. Bad collateral. Of course…but look at the stick rate gang. More than 1 million businesses converted their ownership of MS Office from purchase to monthly service last year. $8.50 per user to always have the current version. They’ll cancel that service either the day they go out of business or NEVER. Sounds like a stream of cash to lend against some way to me.
But that’s freakin’ software. Ahh, but wait…now there’s Hardware as a Service. No reason to have servers sitting in your office when you can pay a simple amount per month for equipment, software, storage and service. Used to be that was $10K minimum in gear…now it’s as low as $100 per month. And what about other, more traditional asset classes? They’re coming.Healthcare is coming online with this really fast. Look at Asteral below:
https://www.youtube.com/watch?v=AGZFjAfu90E
Is this the future of our business? Don’t know. And I’m not sure if this is really a brilliant innovation of something new, or just a brilliant idea to market life cycle management and the cash flow benefits in a way that may have the leasing business with their pants down.
But if you dismiss the idea and the innovation that is moving in the market, you do so at your own peril. Software as a Service probably represents the largest expansion of captive financing in history and it happened right under the nose of the old-time attitudes of the equipment finance business. Could some big, smelly, yellow painted iron or chrome plated rolling items be next?
Be innovative. Lead. Try new stuff and get out of the box. Our strategic marketing advisory helps equipment finance companies position for tomorrow. Experience is important, but an advisory group shouldn’t look like a retirement home. We have deep experience in developing marketing strategy for today in this business and are young enough to realize that it’s good to have a vision of what tomorrow might be without looking through the eyes of grandkids. If you ever wanna chat…give us a holler.