Why do companies like to lease software?
Since the COVID-19 pandemic struck, businesses have been forced to adapt to employees working remotely. As a result, companies are relying on software now more than ever. Software licenses can be expensive, and with the pandemic putting pressure on cash flow like never seen before, more and more businesses are looking at leasing the software, compared to purchasing upfront. We look here at why companies lease software as well as the benefits they receive in doing so.
What are the reasons for leasing software?
- First of all, there are fewer upfront expenses. Leasing requires you to pay a fraction of the full cost on day 1. Paying monthly or quarterly for the asset creates a bigger opportunity for your business to save money in the long run.
- Your business will be given the option by the software supplier to keep your software up to date. This also means there will be a lower chance of security breaches occurring in your company. Read more about security breaches here.
Additionally, here at WestWon, the database we use has 958 unique software companies in the UK, so if you’re not sure about a supplier we can help. We’re also happy to work with a supplier of your choice. We also have a full FCA license, so you know you’re dealing with a finance company that treats customers fairly.
What are the benefits of software leasing?
- Firstly, your cash flow will benefit. You will be able to keep funds in your business that you can invest in other areas of your company (eg recruitment).
- Alternative funding lines are provided and there will be no need to use up existing bank facilities.
- VAT is not paid in full upfront which reduces initial capital outlays
- In the same way you pay employees’ salaries upfront, paying upfront for software is best. Why would you pay 3 years upfront for software?
- You and your employees will always use the latest technology. This is due to the implementation of a refresh strategy – at the end of the lease period, you will get the latest license on the new agreement.
- When you use a lease rental agreement, 100% of your rental is deductible against your company’s corporation tax.
- You lock in the price of the software on a lease – signing up to a 3-year software license protects you from price increases from 3 years, without having to pay 3 years costs upfront.
In addition, there is an option to have ongoing support and maintenance. This will be supplied by the software author/supplier and charged on a separate contract to a leasing contract.
WestWon will work alongside an array of suppliers in order to get you in touch with a software supplier who can meet your needs. Ultimately, it is up to you who you choose as a supplier.
You may be wondering, what is the difference between selling software as a service compared to leasing software?
- Software as a service (SaaS) is software that is centrally hosted. Users will pay to use the software by connecting via the internet.
- This model has been around since the 1960s but is being replaced by software leasing and renting from WestWon provides an array of benefits.
Software companies usually prefer the leasing option, mostly due to the benefits stated above. However, we have seen that software suppliers switch to the SaaS model, partly due to competitive pressures. Read more about SaaS here.
Ultimately, leasing software seems like a smarter decision. Your company will benefit from increased cash flow, up-to-date software, and alternative funding lines.
To see a real-life example of a company benefiting from leasing software with WestWon read this case study.
Software leasing is available for licenses from 1 – 5 years, with leases starting from £1,000 + VAT. Call us today on 01494 611 456 to discuss your needs.