What Is Driving Innovation in the Leasing Industry Today?

Profound changes in the way IT is delivered and consumed will change the face of leasing and asset finance.

Sven Jirgal

Sven Jirgal

VP & COO at Cisco Capital
Sven Jirgal is responsible for three lines of business within Cisco Capital. Technology Financing offers financing services to Cisco customers, Channel Financing provides credit lines and payment terms beyond Cisco’s standard net 30-day term, and Cisco Certified Refurbished Equipment manages the resale of Cisco remanufactured products. Prior to this role, Sven was Vice President of Worldwide Sales and Marketing.During this period, he also led Cisco Capital’s involvement within the “Next Cisco” company initiative.
Sven Jirgal

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Introduction from Executive Producer SHARON BUTLER

NetApp on Innovation series. In the first of several articles on innovation in the leasing industry, Sven Jirgal, VP & COO for Cisco Capital, looks at the topic of data as utility, and whether the infrastructures that we use to underpin it, protect it, move it around need to be considered much more like the infrastructures that deliver the other utilities we rely on such as water, gas and electricity.

Each of the articles include views from industry leaders on the future of asset finance and why the funding community will have to think differently to participate in the new world. Although the focus is on hi-tech assets, other assets will have to catch up because customers are driving the trend to consume products differently.

Future articles will look at what kind of new financing products are required to respond to the customer requirement for new types of consumption models, and can existing funders provide what is needed and if not, who will provide the solutions required?

Who should be interested in this? Anyone interested in opportunities for innovation in the leasing industry.


What is Driving Innovation in the Leasing Industry Today?

Profound changes in the way IT is delivered and consumed will change the face of leasing and asset finance.

What’s driving change in how assets are financed?

The IT industry is seeing profound changes with the progress in cloud computing and the fact that customers are changing the way IT is consumed. The role of the CIO is of course also changing.

In the past, customers would purchase IT equipment, applications and services, and IT departments, together with IT vendors and partners, would install, implement and run IT services and applications. The progress in technology leading to mobile computing, mobile e-commerce has resulted in exponential complexity   At times, customers  outsourced their IT to vendors or service providers such as IBM, HP, Accenture, Atos, etc. This was sometimes referred to as ‘manage my mess for less’.

Today, an increasing range of services are delivered through the cloud. Examples include CRM (Sales Force), email (Google), video conferencing (Skype), accounting systems (Microsoft), storage (Dropbox), etc In these cloud-based models, the customer (aka “subscriber”) no longer worries about IT systems, software or integration and consume technology on a pay-as-you-go basis (with or without minimum contract commitments).

It is the service provider who has to worry about technology, and can leverage massive economies of scale since they can deliver to multiple customers using one technology platform; there is no need to have one dedicated infrastructure per customer.

Service providers are all types of companies, ranging from well-established companies to small, privately-owned start-ups. Increasingly, these arrangements between subscribers and service providers are pure service contracts, with substantial commitments to service level agreements and service usage, but no mentioned of technology or software platforms.

What does this mean for the leasing industry ?

The notion of ‘who is the customer’ is changing. The investments by service providers is substantial, and often investments need to be made before revenue is generated – this is the the chicken and egg of needing investment before money comes in, but the time to monetisation can be variable.

Service providers have a tendency to fund their investments in data centers through corporate finance (bonds, debt, equity) and once assets are installed, they are ‘sweated’ to maximise profitability and minimise disruption.

How these service providers monetize pure service contracts and obtain off-book funding as an alternative to on-book corporate financing is the key question of today.

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