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The asset finance industry is on a continual search for new financial products to best serve their customers. Over the years, this has produced a variety of funding options allowing for business to grow by leveraging the right financial instrument that aligns with their business needs. This trend largely focused on different lease or loan options for an asset or a group of assets but did not include in the services or additional consumables that could be bundled into the overall financing of the solution. This concept has been termed servitisation and is one of the hottest buzzwords in asset finance today. While servitisation may be getting a lot of attention, the concept is not new. What is new is the ability to make this capability available to all lessors through cloud-based solutions.

Servitisation was first seen in the office imaging space where you have the perfect combination of a base asset, coupled with a variety of consumables (i.e., toner, ink, paper) and a need for regular service. In a study published by the Equipment Leasing & Finance Foundation (ELFF) and researched by The Alta Group titled Managed Solutions: Evolutionary or Revolutionary?, the research credits the Xerox Corporation as the first company to offer fixed-term financing contracts for copiers on a cost-per-copy basis.[1] This financing model shifted the mindset of the consumer from thinking about the asset (the copier) to the service (the copier output) now based upon user consumption. While Xerox first introduced this in the 1980’s, it has taken the rest of the technology ecosystem time to be able to accurately report and consume usage data in order to make servitisation models possible.

The real value to the end customer is about driving down cost and increasing overall flexibility. Servitisation allows the end customer to focus on what they need to enable their business and not on asset ownership. With the evolution of technology, we are finding that usage data is now more available than ever before. With billions of sensors attached to assets, the aptly named internet of things provides data on every aspect of an asset. But aligning the enormous amount of data generated by an asset with a financing model that allows for optimal monitisation of the asset and associated services has not been easy to achieve.

The cloud is not a silver bullet that suddenly allows for perfect modeling of consumption with associated financing, but it does provide a delivery mechanism that enables financing firms to get closer to the cost point and flexibility that end customers desire. With the right asset finance portfolio management solution, financing firms are able to leverage the ubiquity and scale of the cloud to be able to optimize consumption and accelerate invoicing against customer usage. This creates more opportunity for financing firms to be creative with new usage. This approach also introduces new service-based products which provide end customers with financing solutions that meets their current and aspirational business needs.

Cloud enables the ability to connect all aspects of the asset finance lifecycle.

This is particularly significant for manufactures. Customers do not want to own depreciating assets. This has put pressure on manufacturers to offer financing solutions that have been typically financed on a fixed-term basis in the past. The cloud, and the ability to consume information like GPS or utilization data from the asset, allow for the consumer to pay for the benefit they are receiving from the asset. For example, agricultural equipment can come with a significant price tag. With the servitisation model, the farmer has the ability to pay only when the equipment is in use which is tracked by the portfolio management software as the data is being streamed from the equipment. In this model, the farmer can focus on farming, only being invoiced for utilization of the equipment and its service which has been built into the overall model.

Cloud provides benefits for the financing firm, manufacturer, and the end customer. For the financing firm or manufacturer, leveraging a cloud solution allows them to focus on their business, deploying assets into the field. For the end customer, all that is required is an internet connection to access information on the assets they have financed. This shift puts the power of information in their hands to be able to manage their overall costs. The software vendor, especially if it is a 100% software as a service solution, is then responsible for the uptime and application management of the solution.

It is critical when looking to implement a servitsation model in the cloud, that you look for a vendor with the ability to scale with your business requirements today and in the future. Specifically look at how their cloud application is deployed. Are they leveraging enterprise scale through a vendor like Amazon Web Services? Are they providing full application management and automated updates? Will they be able to scale up or down to meet your changing needs. These questions will help you make the right choice for your business. Are you ready to transition to the cloud? Now is the time.

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