THE IMPORTANCE OF SOFTWARE

Under the correct circumstances leasing provides substantial benefits to users, vendors and sales representatives. A simple financing alternative can solve business problems and satisfy company and individual needs. Software leasing often allows these benefits in a multitude of ways.

No one can dispute that the hardware industry has grown exponentially since the 1950's - and the major players grew along with the leasing industry. Which helped cause the other? One thing is certain - leasing was a large contributor to the growth of the computer hardware industry. Equally, leasing will be a factor in the growth of the software industry and the companies that choose to use this business tool. Will you be among the new software giants?

SOFTWARE LEASING FROM THE USER'S PERSPECTIVE

From the viewpoint of the user, it is just about the same as equipment leasing, except it's for an intangible, the software and the software license. It is a method of paying for software over time instead of a single upfront payment and the functional equivalent of a loan from the leasing company or the software developer. It is normally structured as a capital lease rather than an operating lease. However, it is often accounted for as an operating lease.

WHAT ARE THE SPECIAL BENEFITS FOR A USER

1. Obtain all the licenses that are needed now to supply all users.
2. Include consulting, hardware, customization, and training costs in the lease. Bundling the individual components of a project in one lease is normally simpler and tends to result in level expensing rather than having some components expensed upfront before benefits are realized.
3. Include internal implementation costs in the lease where appropriate. You're doing some of the work, like data conversion. These costs also be included in the lease.
4. Correct the failure of many accounting systems to recognize the long-term benefits of software and related costs. Many times a lease will permit you to better match software expenses with the period of benefit.

WHEN IS SOFTWARE LEASING AVAILABLE TO A USER

• If the software vendor offers financing
• If the user knows a leasing company which offers software leasing
• If the software cost is greater than $25,000
• If the user's credit standing is relatively high
• If the user has leased hardware

If all or most of the "if statements" are true, software leasing is probably available. And it may be available even if most are not true.

SOFTWARE LEASING FROM THE VENDOR'S PERSPECTIVE

From the viewpoint of the software developer, software leasing is a sales and marketing tool, which provides users with a lease-financing alternative to upfront cash payment. Leasing often results in an increase in revenues, a decrease in sales time, and an increase in user satisfaction levels.

SPECIFIC BENEFITS FOR A VENDOR

1. Include hardware, training, installation, and customization in the lease. Bundling the individual components of a project provides your customer with one-stop shopping and avoids expensing some items upfront before benefits are realized.
2. Neutralize the strategic competitive advantage of competitors, which offer leasing alternatives to your customers.
3. Offer leasing options to your affiliates: your resellers and VARs. You probably have multiple channels of distribution. Leasing programs can be expanded beyond your direct sales force.
4. Realize the potential for additional licenses for additional users, licenses for related products, and additional charges for installation, training and customization that customers require.
5. A master lease agreement with one-page add-on leases allows you to offer users additional products with minimal financing effort by the user.

WHEN WILL A SOFTWARE LEASING PROGRAM BENEFIT A VENDOR

• If your average sale is greater than $25,000
• If you sell direct to the user or through VAR's
• If some of your competitors offer leasing
• If most of your customers are of relatively high credit quality
• If some of your customers have budget limitations
• If some of your customers have financing limitations

If most of the answers are yes, you and your customers need a leasing partner. Used correctly, we can help you solve problems; satisfy needs, that result in a win/win solution for everyone.

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