By: Lisa Nowak, Senior Product Manager
Recently, there has been much discussion at IDS and around the industry about the latest regulatory, accounting and tax changes. In this article, we bring you an update on these regulatory changes, including considerations related to your use of IDS solutions to support your business processes.
As I wrote this article, my home town team—the Buffalo Bills—had finally made it to the NFL playoffs for the first time in 17 years after the longest NFL post-season draught in history. I was recently reminded by a Facebook post that before clinching this playoff spot, the phrase “The Bills are in the playoffs” had never once been tweeted out, posted on Facebook, or spoken by an Uber driver. Technology has certainly evolved a great deal in the past 17 years!
Evolution is defined simply as “any process of formation or growth; development.” The change happens every day, and over time becomes significant, meaningful and measureable. Since managed solutions were created in the 1980’s as a ‘cost per copy’ model by Xerox, both intrinsic and extrinsic drivers have shaped the evolution of the managed solutions model. One universal thread has been the movement toward more efficient, less risky usage-based transactions through the aggregation of components into bundled streams and financing. From the early days of partial bundling to a future model that is moving toward ‘price per anything,’ by way of ‘uberization,’ managed solutions continue to evolve and grow in volume and revenue potential across our industry. In fact, according to the ELFA Foundation study, “Managed Solutions: Evolutionary or Revolutionary?” managed solutions are on track to reach 22% or more of the total equipment leasing and finance industry volume over the next three to five years.
What factors will evolve managed solutions further and what might that future require from a model perspective? In the future, lessees or consumers may be less likely to take sole ownership of an asset and will be more likely to select a capability and evaluate central platforms or networks based on their ability to support managed solutions. Providers or managers of those networks of assets (e.g. the equipment) who have the resources to execute the equipment and the expertise and skills to maintain, evolve and manage that equipment over time, while maximizing its utilization, will surely benefit. Whether these networks are ultimately formed and managed by lessors or other centralized platforms that can uberize the sharing economy continues to evolve. What is clear is that lessees and consumers are going to demand more seamless and more inclusive managed solutions today, tomorrow and well into the future.
What factors do you think will impact the evolution of managed services and what should the industry be thinking about? Several considerations come to mind:
- The rapid change of technology and digital advance is impacting all verticals. Traditional financing models around equipment that will demand to be upgraded more frequently are becoming less desirable vs. managed solutions models. This is both from the standpoint of maximizing utilization and thus the cost/value exchange of technology assets, in addition to the ongoing challenge of finding the in-house talent required to run, manage and service rapidly emerging technology.
- The growth of revolutionary change that drives more transparency and demands better utilization of assets is driving fair price / value exchange. Managed services will grow, in part because of the growth of the internet of things and predictive modeling. Also playing a role is the associated expectation that providers of capabilities with underlying assets understand the behavior and resource needs of those assets proactively, and they can provide the underlying services and expertise when and where needed to keep those capabilities running at maximum capacity. The notion of a sharing economy will also greatly benefit from these revolution technologies. For example, Blockchain is well-suited for capturing and recording the details of a huge volume of transactions, not only financial transactions, but also where and how assets and resources move between owners and users from a supply and demand perspective.
- Even more near term, as managed solutions move from bundling to purer services offerings, the complexities for lessors in managing these transactions increase. How will this impact accounting and regulatory treatment, in an era favoring even greater transparency and exposure? Equally important, how will lessors manage these offerings without greatly increasing systems’ workarounds or manual efforts? IDS has and continues to implement support for more complex and more inclusive managed solutions models including flexible options for pooling, proration, tiering and associated accounting and invoicing. As managed services evolve through bundling to true service offerings, more parties are likely to become involved across the service offer, and that process will need to be as seamless as possible to those utilizing the capability.
If you want to learn more about how IDS can solve your managed solutions business requirements, please reach out to me directly or contact your IDS Account Executive.