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.

Assignment Financing

As these offerings continue to shape and influence the way customers buy, so too are they impacting how companies are securing financing.

For OEMs or vendors that have established as-a-service contracts with customers, assignment financing can be a great option. It's a convenient solution where a lender provides cash payment for the procurement of certain assets or contracts. In as-a-service, the OEM, reseller, or vendor assigns the as-a-service contract to a lender who provides upfront cash payment based on the value of the payment stream. Assignment financing can be advantageous for companies as it provides seamless access to capital which can be used for operational or other expenses, and it does not require any changes to the company’s selling or business model.

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.