Why Firms Lease their Digital Projects

Digital technology is affecting every aspect of modern life, transforming our standard behavior and activities. In fact, 88 percent of business executives stated that their firm is undergoing a formal digital transformation1, creating new business practices by changing the way we work, do business, collaborate, and service our customers.

In retail, digital technology has changed the way shops are organized through augmented reality applications which optimize store space. Interactive terminals not only increase average basket sizes by offering related products, they also provide a more seamless customer experience. Retailers also are benefitting by using motion detection which tracks and identifies in-store customer spending habits.

In education, introducing digital learning at an early stage can stimulate students’ enthusiasm, reduce drop-out rates, and offer more flexibility in terms of space and time for teachers.

In the legal industry, technology allows law firms to offer a better insight at a reduced cost, create automated processes to remain competitive, and provide predictable legal fees.

At present, firms are rapidly becoming more digitalized due to the increase of connected devices talking to each other: the Internet of Things (IoT). The IoT allows for endless opportunities and connections to take place, the impact of which is not fully understood today. The IoT is growing at more than three times the speed of traditional Information and Communications Technology (ICT), and by 2020, it will nearly equal all other ICT spending2. Communicating devices will bring considerable changes in companies’ asset portfolios, as well as raising questions about security, privacy, and data storage analysis and sharing.

However, the digital transformation brings new challenges not only for IT, operations, and marketing, but also for finance. Indeed, those new digital solutions, although essential for firms to stay ahead of the game, represent considerable investments. Companies are concerned with cost of rollout, with 50% citing lack of funds available as the main barrier to investing in digital projects3.

In addition, in an ever changing world where IT assets have a short life-span and require significant admin, maintenance, and insurance costs, smart alternative finance options are available to remove the risk of your technology becoming obsolete.

Leasing offers firms the opportunity to purchase the technology they need, when they need it, by freeing up their cash flow to invest in core business activities and become more agile. Leasing also offers businesses the opportunity to access the higher standard of equipment they want, which may have previously been too expensive to buy outright. Investing in new software or technology is very often synonymous with cash spikes that can paralyze a company. Replacing investment peaks with fixed and fully tax deductible rental payments offers vital flexibility for high tax payers.

In the United Kingdom, there are significant tax advantages to leasing, especially with the significant drop of the Annual Investment Allowance (AIA) coming into action next year. As of January 1, 2016, the AIA will be reduced from £500,000 to a mere figure of £200,000 – a major consideration for businesses in the UK, which makes leasing an even more attractive solution to finance assets.

Why should firms have to pay a significant amount in the first year, for a technology asset that will span across five to 10 years of business’ value? To address this issue, leasing gives companies the opportunity to match the cost of technology investment with the business benefits over a number of years aligned with their strategy. Flexibility is indeed key to success, and smart finance models offer you just that. Companies have complete freedom in the structure, duration, and frequency of their lease payments. Each lease is tailored to mirror a firm’s strategy.

Finally, in today’s dynamic world, where firms need to refresh their technology every five years to keep up with the latest trends, leasing is a positive alternative for them. By matching the lease term with their refresh cycle, businesses reduce the risk of IT assets becoming obsolete and reduce the real cost of hardware through residual value.

This new digital world is bringing endless opportunities. Digitalization and the Internet of Things provide a better way to interact with customers, create more efficient business processes, and offer a differentiating advantage. Smart finance solutions exist to help you benefit from the potential of the digital revolution, now!

1 Altimeter Group Digital Transformation Survey, 2014
2 EMC, The Digital Universe of Opportunities, April 2014
3 and CSC study, Digital Transformation, 2015


Econocom is Europe's largest independent provider of technology finance and associated services. Active in 20 countries across Europe, Morocco and North America, Econocom has been working closely with the legal sector for more than 20 years. Econocom has many years' expertise in the financing of large hardware and software projects such as CMS and PMS systems. By working with Econocom, our clients benefit from stable IT budgets and comprehensive management of their technology portfolio. This means they can concentrate on their core business free of the administrative and budgetary hassle of buying technology. Click here for more information.

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