Why it is smart to lease and not buy Software?

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Businesses of all sizes are facing an inevitable digitization trend. If they want to stay competitive, they need to focus on process optimization through the implementation of different software solutions. This can sometimes be quite a challenge from an investment perspective. Larger corporations with more robust cash flows and financial assets can afford to invest in new Software whereas for smaller companies purchase of a Software can be a substantial liability.

Luckily nowadays there are different business models available on the market from purchase to leasing and other hybrid arrangements. Let us look at the possibilities and benefits of leasing a software as opposed to purchasing one.

Access to the latest software

Buying a software means a substantial financial investment and a commitment to a specific solution. This is ok and can provide you with a lower investment cost in the long term. However sometimes when implementing software, you can find out that this is not the right solution for you but then there is no way back.

On the other hand, software leasing agreements offer you much more flexibility. You can lease a software and in case you find it inappropriate you can cancel the lease and lease another solution. This gives you the flexibility to focus on optimal solutions and the flexibility to switch to the latest software solutions that suit your processes best at any given time.

Scalability and flexibility

The other benefit of software leasing is its scalability and flexibility. Most lease agreements offer flexibility to upgrade the software or include add-on features seamlessly. Usually, these arrangements are included in the leasing price whereas with the purchase of a software you need to purchase the upgrades or you need to pay extra for development of new features you might need within your business processes.

Software leasing also enables scalability for the use of your software. You can usually easily add or subtract certain modules or extensions based on your requirements or you can scale the use and the cost of the software by changing the number of leased user licenses/accesses. If you extend your business, you simply add modules or user licenses/accesses to your lease and quickly move forward. In case your business subtracts you reduce the lease and again optimize your cost.

Financial benefits and cash control

Buying a software can bring you lower investment in a long-term looking strictly from a purchase price perspective. However, you need to consider various parameters to understand your total cost. There is always a question of making the right decision and buying the right solution to begin with. Once you purchase there is no way back. Then there is scalability potential and connected cost optimization which is only possible with the leasing arrangement. Finally, with a leasing agreement you know the total cost of leasing, upgrades and maintenance upfront whereas with the purchase often this is where the costs cannot be estimated and can grow substantially.

In case of leasing there is no requirement of an upfront payment, the company has better cash control, and there is more available financing for the company’s core business. Monthly expense for a leased software is fixed and typically includes entire maintenance, upgrades, archives, and any other associated costs. As a result, there are no disruptions in the cash flow and allows you for more stable finance planning.

Of course, there can be further doubts about software leasing and potential cons such as you do not own the software, the data are not stored on your servers, there is security exposure, etc. These are surely important perspectives to be considered when deciding about the business model. Nevertheless, modern clouds such as Oracle cloud we at Imagine are using and security certificates (ISO 27001 and ISO 22301) which Imagine also holds can provide you security and control of your data and give you the comfort of deciding for leasing business model.

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