As-A-Service Contracts: The OEM/Vendor’s Secret Weapon

The as-a-service business model is, indeed, everywhere. Once the exclusive domain of software, as-a-service continues to change how organizations do business. In shifting the customer-supplier relationship from a traditional model of ownership to one focused on providing value to customers on an ongoing basis, as-a-service contracts benefits both buyers and sellers.

How it works

In an as-a-service transaction, a supplier provides a service (or product with associated service) on a non-ownership basis, typically as a subscription. The as-a-service model is particularly attractive for products or services requiring expensive, time-consuming, complex implementation. IT is one good example. Companies can have a very hard time staying up to date with the latest advances in hardware and software. A subscription service, or as-a-service model, allows them to reduce upfront spending and increase flexibility while obtaining access to the latest technologies.

As these offerings continue to shape and influence the way customers buy, so too are they impacting how companies are securing financing. As-a-service financing structures can reduce – or remove – up-front capital requirements, providing a cash infusion that can even eliminate the need to seek outside funding for business investment.

As-a-service moves to financing

For OEMs or vendors that have established as-a-service contracts with customers, assignment financing can be a great option. In assignment financing, an OEM or vendor receives upfront cash for the payment stream which then can be used as revenue for operational or other expenses, without modifying how they sell or conduct business.

For OEMs or vendors that do not yet employ an as-a-service business model, customized financing programs can be created so that they can sell via a monthly payment. This often helps a company become more competitive – and helps them avoid the potential risk of discounting equipment to sell on a traditional purchase basis. Setting up and running the program on a private-label basis can take additional burden off the OEM or vendor, while making day-to-day financing seamless and even more efficient for their customers.

OEM/vendor benefits of assignment and as-a-service financing

• Accelerates the sales cycle.
• Improves cash-flow predictability.
• Simplifies purchase agreements.
• Can reduce or eliminate the need for equity or debt financing.
• Increases competitive advantage.
• Develop recurring revenue and better account control

As technology, healthcare, robotics/automation and other industries look for alternatives to traditional funding sources, assignment financing provides an effective option. Developing and extending true relationships between customers and providers – going beyond just a transaction – adds to the benefits.