One interesting consideration is introduced by some new IFRS (International Financial Reporting Standards) guidelines that took effect at the beginning of 2019. Of particular interest are the changes related to the IFRS 16 standard which say that going forward, virtually all leases must be treated as CapEx. Why this matters has to do with the definition of a “lease.”
On January 1st, 2019 a new lease accounting standard, IFRS 16, came into effect for all companies that report under the International Financial Reporting Standard. Under IFRS 16, virtually all leases must be shown on a company’s balance sheet. This can have an important impact on large technology purchases and to technology vendors who hope to make it easy for customers to buy. Let’s explain why.
In general, leases have been of two types: finance leases and operating leases.
My colleague, Drew Wright, wrote a piece a couple of years ago invoking both the Gene Simmons novelty-rock band and a reminder that “Keep it Simple Stupid” doesn’t always apply (like when applying discount increments).
For me, when I think about keeping it simple, I remove
the last S, because none of us are stupid and keeping it simple can frankly be
hard. After all, simplicity can be is the ultimate sophistication.
In the course of working with our technology clients and their enterprise sales teams, we’ve noticed an interesting trend in the last six to twelve months. Increasingly, I.T. buyers are expressing a preference (or sometimes a need) to be able to acquire cloud-based technology as a capital expenditure event rather than as operating spend. That’s right, the buyer is asking for a CapEx offer vs OpEx.
This is contrary to the pattern of I.T. buyer behavior we’ve seen over the last several years, which has been toward buying technology with operating budget dollars rather than CapEx. However, a recent pivot toward a desire for spending CapEx dollars shouldn’t be entirely surprising for a number of reasons.
We live in a world of increasing complexity. In their quest to create value, enterprise customers continuously test and embrace new technologies, which come with many labels–-digital, analytics, automation, the Internet of Things, machine learning, artificial intelligence, and so on. Software deployments now involve public clouds, private clouds, hydrid set ups, managed service providers, and/or customers’ premises. Software licensing metrics may involve users, seats, names servers, geographies, limited timeframes, sublicensing…
As a consequence, use-rights being applied to modern IT environments have some times evolved into complex (and potentially baffling) licensing terms which has made entitlement tracking more difficult. The risk is now higher that even simple technology refreshes will cause an enterprise to fall out of compliance.
Simple is better—Best Practices from the Software Industry
“Simplicity is the ultimate sophistication.” Leonardo da Vinci
“Making the complex simple” is a promise built into the ethos of companies in just about every industry and business imaginable. What are these companies trying to tell us?
Oracle taught me the benefit of making the complex simple some 20 years ago through their successful vendor financing program. Oracle Financing had many Fortune 500 clients, who absolutely did not need “financing” from Oracle, however, these clients routinely used Oracle payment plans to enable their transactions. Why? Because they were simple. (more…)
In retrospect, as a result of working in tandem with many enterprise software vendors (large & small, private & public) across a tenure of more than twenty years, I have found certain unmissable similarities among my clients. These trends, whether intentional or unintentional, can have a direct effect on bottom line results and specifically on an organization’s ability to be effective. Often it takes the perspective of an outsider or third party consultant to point out such trends that sometimes become corporate culture. I find that a company’s ability to quickly identify which trends are accretive to corporate goals as well as trending activities that can break down effectiveness often can be the difference between success and complacency.
For example, how does a silo mentality affect an organization’s ability to execute in a sales capacity? (more…)
On a recent tour of Alcatraz, I learned the story of the famous Alcatraz escapee, Frank Morris. Despite all odds and having limited resources, he and two others managed to escape the island and were never seen again. In some ways, the story of his research, planning and determination reminded me of a good account manager. Veteran sales reps know that focused research and thorough planning are critical to executing a professional proposal.
This can be a time consuming but exciting step–determine what is important to your customer. Do you know your customer’s business initiatives? Do you know how your customer’s sales are trending? Have you read the CEO’s Letter to the Shareholders? You should!
How many of us have lost a deal and felt this way? You spent months working on the deal and didn’t get it. You felt like the time you poured into the negotiation should account for something, right? WRONG!
I recently was on a business trip. I was traveling with two women who also work in financial sales.
One of our group members, we will call her Mary, was knee deep in a transaction. She still needed several items from her client including a statement from his accountant and a credit card number for the bank appraisal fee. Mary thought the deal was in the bag. She was already counting her commission dollars. Thursday, Friday and Saturday she spoke to the customer reminding him repeatedly of the documents she needed; however, he was dragging his feet.
On Sunday night Mary received a call from her client. While on speakerphone, she rattled off the information she needed to submit his application. By this time, we all knew what he needed to send. The client interrupted her and said “STOP.” Now, Felicia and I knew from experience what was about to happen. Mary’s client told her he was going with another lender who already approved him. (more…)