In today’s landscape of constantly-changing technology, businesses are under a lot of pressure to stay up to date. The costs of continuously replacing old tech with new can be staggering, especially for smaller businesses whose budgets may already be stretched thin.
What’s a small business owner to do? Many are turning to the fast-growing subscription economy for answers.
“Subscription economy” is a phrase referring to the rise of the subscription-based model and its influence over the way companies conduct business in recent years. Due to increasing consumer demand, many businesses are now offering products on a subscription basis rather than a pay-per-product basis.
The tech industry, associated as it is with high costs and rapid product obsolescence, has seen an upsurge in technology-as-a-service (TaaS) companies looking to change the way we consume technology. This is fantastic news for businesses for a number of reasons:
Small companies with equally small budgets have historically been at a disadvantage against large companies who can afford to spend the big bucks when it comes to buying and updating their tech. The introduction of technology-as-a-service levels the playing field by allowing businesses to acquire technology via monthly or yearly payment plans instead of buying outright, lowering costs dramatically. This, in turn, allows businesses to buy more or better tech than they would have otherwise been able to.
Hardware such as printers and computers have traditionally fallen under an organization’s capital expenditures (CAPEX). The asset is recorded in the balance sheet and expensed using depreciation to spread the cost out over the years of its useful life.
Technology-as-a-service has changed all of that. Tech acquired through TaaS, being subscription-based, is typically categorized as an operational expense (OPEX) instead. Operational expenses, unlike capital expenses, are fully tax-deductible in the year they are made. For companies or organizations with limited cash flow, this makes TaaS subscriptions an attractive alternative, freeing up their capital and allowing them to better manage their cash.
Purchasing technology can be an expensive and lengthy commitment, which is what makes the ease and flexibility of a TaaS subscription so appealing. Customers are able to choose the subscription payment terms that suit them and their business needs best, whether that be monthly, quarterly, or annually over a 12, 24, or 36 month term.
Businesses making large CAPEX purchases might not have the budget for any additional associated services, but the lower cost of a TaaS subscription plan—tax-deductible thanks to its OPEX status—allows businesses to make the most of their money. Training, extended warranties, managed services, and more can be added to a subscription without having much impact on the overall cost.
As previously mentioned, keeping up to date with the latest and greatest technology can be a frustrating and costly struggle for businesses. The traditional pay-per-product method of acquiring new tech has business owners investing huge amounts of cash in products that will likely become outdated long before their useful life is up.
TaaS, on the other hand, cuts financial waste by giving customers the ability to continuously update and upgrade to the most current technology—you only pay for a product for as long as you’re using it. Not only does this keep expenses low, but business owners are able to easily keep up with their business’ evolving technological needs, allowing them to stay relevant and competitive.