“BNP Paribas Leasing Solutions is more than a third party loan provider: it’s a special partner.”
Founded in 1989, Secib specialises in publishing software and information systems aimed at the legal professions.
Based in France and Belgium, this historical BNP Paribas Leasing Solutions partner has made a business of durably improving the performance of law firms thanks to innovative and powerful IT solutions.
The firm’s CEO, Hugues Galambrun, agreed to reply to a few questions.
What were your requirements when you called in BNP Paribas Leasing Solutions?
We are software publishers and are currently switching from a licence-based to a service-based SaaS* business model. This type of offering has a number of significant advantages: automatic maintenance and updates, the ability to use the software with a simple Internet connection, and budget control since payment is based on usage. So, we believe this solution had to be extended to all our customers.
Nonetheless, switching from one business model to another is a complex issue. Leasing is an obvious way of developing our business. Had Secib started out in the leasing world without a financial partner, the company would not have been able to benefit from immediate, secure earnings.
We therefore needed a financial partner who knew the leasing business and could grasp our challenges in terms of cash flow. The legal aspect was also a major issue that needed support.
To what extent did BNP Paribas Leasing Solutions’ offer meet your needs?
We succeeded in building a truly customised solution and a contract that legally fits my company.
Thanks to this offer, we are generating immediate income, and, more importantly, we’re switching from a licence to a service-based model without putting our business at risk. As for my customers, they now have a flexible, economical solution they can access anywhere.
What benefits are you getting from the Secib / BNP Paribas Leasing Solutions partnership?
For me, BNP Paribas Leasing Solutions is more than a third party loan provider: it’s a special partner that provides both advice and expertise. BNP Paribas Leasing Solutions’ people were with us every inch of the way while we were building our business offering. Thanks to them, we always find the right solutions to come up with offerings that are both attractive to our customers and profitable for us.
In addition, the vast majority of our customers (95%) switched to the SaaS model smoothly: they are basically highly satisfied with this solution as it empowers them to work more flexibly.
*SaaS (Software as a service): Software as a service. SaaS lets people use software without having to install it on a computer because it is hosted on the Cloud.
With customers no longer seeking to own assets, they are demanding ever-greater flexibility in the way they pay for usage. That places the onus on manufacturers of products to think about the life cycle and maintenance of their products beyond the point of sale, and leasing models play a central role in helping companies boost productivity and sustainability. Embracing the sharing economy can lead to increased productivity and ‘collaborative consumption’ is a growing facet of transferring these principles into industry and business. If these concepts become part of the lifeblood of heavy industry, strategic changes will have to occur at a corporate level to ensure this approach drives productivity. The sharing economy has transformed industries such as transportation and leisure, disrupting traditional channels as consumers trade with each other to rent assets as they need them. But it has developed beyond simple peer-to-peer sharing of underused assets into the subscription economy – a business-to-consumer offering that is transforming the notion of ownership. Nowadays, people are prepared to pay for products as they use them, rather than bearing the cost of ownership. This phenomenon is forcing a fundamental change in the way manufacturers interact with their customers. They are no longer selling a product, but building long-term relationships that often span the life cycle of that product and are based on usage rather than ownership.
Vehicle dealers are selling cars by proposing a rental solution where the customer pays for the usage over two or three years, including maintenance, and is no longer searching for ownership. Leasing solutions provide a catalyst for companies and customers to make the transition to a usage economy, says Pascal Layan, COO of BNP Paribas Leasing Solutions.
The growth of the sharing economy has drawn response from traditional manufacturers. In September 2016, US car giant Ford acquired Chariot, a peer-to-peer rental platform for commuters in San Francisco. Chariot was using 100 Ford Transit 15-seater vans to serve 28 crowdsourced routes that were based on demand from riders, but Ford is planning to use data algorithms to allow trips to be scheduled in real time. By investing in peer-to-peer platforms, traditional manufacturers such as Ford, General Motors and Caterpillar can gain a highly sophisticated picture of consumer behaviour and usage patterns. ‘There is a compelling argument for integrating data analysis into finance decision-making, and urging end customers and suppliers to educate their respective industries around a more strategic view towards leasing,’ says Layan. By understanding customer-demand patterns, companies can manage inventories and anticipate usage. The transformation of traditional industries through technology has proved to be a disruptive force, but it also presents opportunities for companies to understand – and respond to – customer needs, as they move away from ownership and towards demand-based subscription models. Beyond this, there is a clear role for leasing to play in creating and supporting a more sustainable economy. With manufacturers now looking beyond a simple sale to a long-term pay-per-usage relationship, the onus is on them to move away from the traditional model of built-in obsolescence, or one where phone or PC manufacturers are constantly providing new versions of the same product in order to shift more units. In the agricultural sector it is in the clear interests of landowners to ensure sustainable methods of farming. Furthermore, farming is well suited to the leasing model because farmers have working capital tied up growing crops or producing livestock so need flexibility when it comes to the usage of farming equipment, which is crucial to their operations but not needed all the time. Farmers are able to lease the latest equipment to allow them to manage their crops and gain information about projected yields. This equipment would be too expensive to own but by leasing it they can use the most-up-to-date technology.
When businesses lease instead of purchase, equipment manufacturers will need to consider not only what happens the moment a product is sold, but also how they can extend its life cycle to promote re- use and support sustainability. This creates a virtuous circle of collaborative consumption for the life cycle of the machinery. BNP Paribas Leasing Solutions works with manufacturers and end-users to create flexible solutions based not just on payment of an asset but also its usage. With leasing companies also now offering an all-in- one solution that includes maintenance and renewal, the advantages of usage over asset ownership become even more compelling when it comes to upgrading and recycling equipment. This leasing model forms the bedrock of the circular economy, which will replace the linear economy as we keep resources in use for as long as possible, extracting the maximum value from them while they’re in use. While a customer may pay for a product for three years, it can be used by someone else at the end of that cycle. ‘As a leasing company, we can facilitate that circular economy. When a product comes to the end of its usage and reaches obsolescence, the asset is returned to the manufacturer or a specialist recycling facility and it goes back into the production-cycle process. As the leasing company, we have a huge role to play in the movement of an asset from “cradle to cradle”,’ says Layan.
Offices of the future will be usage-based, multifunctional and adaptable.
Today’s offices were built to solve problems that existed in the past. But modern working practices are making those workspaces obsolete and paving the way for more innovative financing and usage-based models.
Changes in demographics and advances in technology are driving demand for a new way of working – a dynamic working environment that must adapt to the needs of its workers, rather than the other way around. Companies are looking to technology to create the workplace of the future – one that is focused on boosting staff productivity, recruitment and retention.
Within a generation, the notion of the office has moved from a place where staff sit at desks in closed offices, to open-plan offices, to new agile working environments in which staff may not have a desk at all. Meanwhile, flexible working has gone from being a worker entitlement to an essential tool that organisations believe will boost productivity.
A workplace that worked for baby boomers may not be suitable for millennials – digital natives who communicate remotely through smartphones, video conferencing and social media. They no longer see the office as a fixed permanent location where they go every day. Technology and the cloud mean employees can carry their offices with them wherever they are, and email allows them to be permanently connected.
This diminishes the importance of the physical workspace, and challenges companies to re-think the physical world. The rise of the usage economy means companies are no longer looking for ownership of physical assets, but rather seeking the flexibility to remain agile to business trends and economic cycles.
Maintenance is no longer the responsibility of the tenant. Landlords must partner with experts to provide a ‘future-fit’ workplace. At the same time, the pressure on companies to reduce costs and capital expenditure is another powerful factor driving companies to reduce their reliance on owning and managing physical office spaces.
Global companies are encouraging more of their staff to work from home in an attempt to control expenses as well as boost productivity and staff engagement. And as they sell off or close expensive office spaces in favour of new, more cost-effective spaces, they want a purpose-built offering.
The majority of people in knowledge-based roles can now do their jobs with little more than a phone, a laptop and an Internet connection. According to a survey by Deloitte, the workplace of 2020 is characterised as ‘elastic’ in nature. Elasticity must prevail in work practices and strategic decisions as digitisation and the social experience become even more ingrained in the worker’s day. For a workplace to remain agile and mobile, as well as data-centric, C-suite decision-makers must be able to predict what changes will occur in their industry and adjust their transformation plans constantly.
These changes mean the offices of the future must be multifunctional, adaptable spaces where employees can gather to innovate. For example, some companies now look for ‘activity-based offices’, which operate different zones, such as presentation rooms, larger rooms for generating ideas and smaller spaces for quiet working.
To reap the benefits of technology, businesses must re-think their approach to the office in terms of design and inventory. Leasing office space is a long-established trend, but with fewer people working office hours, in a smaller physical space, it is an approach that companies should apply at every level. As technology continues to advance, assets begin to depreciate as soon as they are bought – now more than ever. The notion of leasing commonplace office equipment and supplies suddenly becomes more appealing – and cost-effective – especially when cash flow may be needed for other elements of an agile workplace transformation.
If you want to be efficient you always need new technology and this is only possible if you lease. If you want to have ownership that means keeping an asset for five years, even if it’s obsolete, says Pascal Layan, COO of BNP Paribas Leasing Solutions.
As well as big global companies seeking to re-engineer their workplaces to fit the changing needs of staff and customers, smaller start-ups have grown up with a vision of the agile workplace. They may only need space on an hourly basis to meet clients or use video-conferencing facilities and are comfortable with pay-per-usage models. The onus is on landlords to provide a future-proof working environment.
Along with landlords and tenants, service and infrastructure providers are embracing the future workplace with subscription-based models. For example, Amazon’s cloud computing business is now taking on the likes of Microsoft and Cisco Systems with the launch of Chime, a video-conferencing service for its cloud computing users. The new service will enable customers to have conversations and video conferences wherever they are based, using desktop computers, iPhones or Android devices. This bundling of services on a pay-per-usage basis mimics the approach that mobile phone and broadband players take to consumer markets.
The use of subscription-based services in the offices of the future will accelerate as more millennials move into decision-making roles in the economy. PwC cites a Eurobarometer poll, which found that a third of 25–39-year-olds have used a sharing economy service – and are three times more likely to do so than those aged over 55.
The adoption of subscription-based models is driven by a shift in consumer behaviour. There are now a whole bunch of services people are happy to rent as consumers, and that is translating into the workplace. People don’t stop being people when they come into the work environment, adds Layan.
In the digital age, technology is transforming the way business is conducted at every stage of the supply chain. It’s the catalyst that powers a shared economy that values access over ownership. This trend is reflected by consumers, who are showing a sharp preference for subscription-based services, while small and medium-sized companies in high-tech industries are embracing models where they pay for usage so they can keep pace with change and release capital to power their core businesses.
The shift from ownership to usage is a profound and secular change and the rise of ‘Software as a Service’ (SaaS) is redefining the way companies and their customers behave. Technology is the key enabler in a revolution that allows manufacturers to provide assets to people who need them on a pay-per-use basis.
What happens in consumer space makes its way into the business workplace. The sharing economy is becoming more and more widespread in the business-to-business market. Businesses are more inclined towards subscription-type services than they were four or five years ago, says Pascal Layan, COO of BNP Paribas Leasing Solutions.
Millennials are already accessing services on a pay-per-month basis and as they enter the workforce and become key decision-makers, the businesses they work in will adopt subscription based or leasing models which offer immediate access to essential assets without upfront capital investment.
This proliferation of subscription-based models in the business-to-consumer segment is particularly evident in the adoption of cloud-based and managed services, which have disrupted the traditional hardware market.
Pressure to reduce costs and meet the ever-growing demands of end customers are driving forces behind the acceleration of the use of cloud services.
SaaS allows users to subscribe and use application software in the cloud but subscription-based models also apply to cloud computing or ‘infrastructure as a service’ and operating platforms or ‘platforms as a service’.
These models mean users needing more computing capacity can access it quickly – at any level – and then reach the data they need from any device. And improvements in encryption and security mean server providers can ensure customers are better protected.
An improvement in security has been a significant factor in persuading the financial services sector – which has been slow to adapt to cloud services, relying instead on ownership of proprietary servers – to move towards a subscription-based model. For big banks, the advantages of using cloud services, such as being able to deliver products globally and on-demand as well as reducing costs to meet tougher regulatory capital requirements, have been outweighed by risks associated with data leaks.
The benefits to start-ups and small and medium-sized enterprises are self-evident as they can rent the latest technology, thereby lowering the barriers to entry in virtually every industry so they are not constrained by working-capital requirements.
While leasing and subscription-based models used to be seen as expensive alternatives to asset ownership, they now have a critical role to play in a world where the sheer pace of technological development means small and medium-sized companies dare not risk spending capital on owning and maintaining their own servers.
The shift by customers from asset ownership to a subscription-based model distorts the business models of manufacturers, who bear the costs of production but only earn revenues on a monthly basis. Where previously companies would sell an asset and realise their invoice value on day one, under a subscription-type economy companies must have the capital means to offer the customer the service or the product on a two-year basis and expect that money on an annuity basis, month-by-month or quarter-by-quarter.
Often, companies don’t have the upfront capital on their balance sheet to offer a subscription service.
Leasing solutions have a big part to play in helping manufacturers and resellers make the transition to a pay-per-month subscription model by providing capital to the manufacturer and its distribution channel on day one, then offering a hybrid subscription-like model to the end-user, says Layan.
The so-called hybrid subscription-like model is particularly suited to hi-tech industries and highly regulated sectors such as medical supplies and biotechnology. In the radiology sector, the need to have perfectly maintained equipment that can be kept up-to-date and meet regulations favours a leasing rather than an ownership model. ‘Paying on a per-usage basis suits the healthcare sector, where companies adopt a budget approach,’ says Layan.
Faced with this threat from the shared economy, whether for cars, equipment or music, traditional manufacturers are being forced to respond to – and embrace – different approaches to business and financing. Traditional industries that have made the leap include the automotive sector, which has responded to a market dynamic where consumers are no longer searching for ownership.
