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Financial Control & Flexible Consumption: A Match

Posted on Thursday, July 02, 2020
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By Craig Lodzinski
Chief Technologist for Emerging Technologies

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Remember Bob? We had such a great response to our fictional character and his remote datacentre exploits, that we’ve decided to continue the story – but we’re leaving Bob on the beach and heading back to the offices of CompuGlobal Megacorp to see how his colleagues are coping with their day-to-day challenges.

So, let’s join recently appointed Finance Director, Morris, who’s trying his best to ensure that asset intelligence matches financial control and visibility. Don’t worry, it’s more entertaining than it sounds...

Ping, ping, ring, ring…

It’s FOMO Monday. Notifications are coming in fast and furiously to the laptop and it feels like the phone has not stopped for the past hour.

“Morris! The Spotify renewal is due! It’s £539.64 for three years.” ‘What?’ “Yeah, Netflix is due in at quarter end too. If we take a five-year plan with support and maintenance, it’s £599.50. We’ve also got the phones to refresh soon, do you want new hardware or just software?”

Morris wakes up in a cold sweat. Phew, it was just a nightmare. Ever since he became FD at CompuGobal Megacorp, he’s been inundated with huge budget requests from his IT department, and it has had an effect on his subconscious – clearly, the challenges of balancing the books at work are bleeding into his personal life.

After gulping down a rather large coffee, he starts to think again. A five-year Netflix plan? What was that all about? He decides to take a look at their website to make sure he isn’t still asleep, but it’s all there in black and white. Scratching his head and wondering whether it’s his colleagues or children who wanted the service, he rings Bob.

‘International dialling tone, that’s odd’ thinks Morris. “Bob, I need a list of all the renewals and capital purchases requiring financial approval for the quarter that your IT team needs. Wait, is that... Hula music in the background?”

Morris rings off and by the time he’s poured himself another coffee, the email from Bob pings into his inbox. Attached is a spreadsheet filled with upcoming purchases and renewals, along with estimated costs and notes diligently compiled by procurement. Row after row of huge capital expenditure, and support renewals, some of which are more than the initial purchase.

Morris is no philistine; he knows that IT is the lifeblood of CompuGobal Megacorp corp. But after authorising huge capital spends to ensure employees could safely work from home, he is somewhat worried about what all this spending will do to the already strained cash position. The Cash Conversion Ratio has dipped under 1.0 lately, and Morris needs to check his numbers before making any decisions.

After a quick glance, he sees that the figures are healthy, but he is still thinking about other critical things the business could benefit from if he it didn’t spend all that cash in one go. Low Interest rates look set to stay that way, as well as the cost of borrowing, but what about that Office365 thing? Best email Bob.

Re-evaluating how to move forward

Tongue-in-cheek scenario or not? The reality is that – just like Morris – business IT decision makers are all tiptoeing into phase 2 of the Covid-19 crisis with a glimmer of light now appearing to shine like a new normal. Clearly, adjustments are required.

In a very short period, the fall-out affecting the global business community is showing signs of a significant and lingering thud into reality. Organisations are very much having to focus on sustainability and in many cases re-work and re-evaluate how their business can move forward. They’re having to create ‘on the fly’ agile business models as a way of adjusting to the challenges being felt and move into a journey of recovery that could take some time.

There is now a need to shape the new normal, support business as usual, but also seize the opportunity to accelerate a digital agenda and transform to a new way of working. However, with fast change, comes unexpected challenge. Critical business issues such as financing and various payment options are now becoming rapid focus areas for IT decision makers such as our character, Morris.

Balancing the current needs of the business with a longer-term view

In the short term, deferred payments and extended low-interest finance are the order of the day, to reduce the impact that imminent purchases have on an organisation’s financial and cash position. Many larger vendors operate as finance houses (Softcat is a prime example of this) that can work with businesses and thirdparty finance organisations to deliver the right solution.

Taking a longer view, IT functions are now looking to take advantage of subscription and ‘as-a-service’ models that reduce capital expenditure and increase flexibility. The legacy model of acquiring as much as you can (or more if you can get away with it) once every three to five years, is giving way to buying what you need, when you need it and optimising spending dynamically. Even for purchases where it’s necessary to put ‘iron on the floor’, these ‘as-aservice’ models, coupled with ‘noforklift’ in place upgrade capabilities, are creating a cloud-like experience and procurement for a wider range of IT purchases.

For consumption that already takes advantage of this model, organisations can still achieve efficiencies, and make the most of inclusive licence benefits, reserved and spot instances, consolidated billing and committed spend discounts. But a cloud intelligence team should be consulted to offer a wide range of services and advice to help navigate this process in the right way.

By balancing the immediate needs of the business with a prudent long-term view, organisations will maximise the efficiency of their IT spend and ensure they are providing the best service levels without unnecessary overspend, or risking pushing problems out to the future.

But let’s leave the last word to our new friend Morris, who outlines the five tests of best practice to ensuring that asset intelligence matches financial control and visibility:

In Summary

Morris’s world might be fictional, but the challenges he faces are very real. FDs in organisations everywhere are faced with having to ensure that asset intelligence matches financial control – and it can cause considerable headaches. So, if you’re currently in a similar situation and you require assistance, don’t hesitate to get in touch. Softcat’s team of advisors and consultants will be happy to discuss your requirements and help you work out a strategy for success.

Despite the tough times we’re living in at the moment, we’re here to ensure you can see the wood for the trees.

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