When the terms "software leasing" and "software financing" are used, people and businesses alike are sometimes unsure exactly what these terms mean. This is mainly down to the fact those in business are not open to the fact software is actually a commodity that can be paid for over a time period.

When it comes to hardware though, companies will quite happily invest in it or even a car, but will lose sleep over the high price of useful, software and how they plan to pay for it. End-users are not the only ones who feel this way, it is indeed the developers too, who create the software, and see no reason for providing finance for it.

The good news is that these days, there are specialised equipment leasing and financing companies that offer small to medium sized firms software financing. They are starting to respond to the demand for software leasing and financing and include it as an choice in amongst the equipment they lease or finance.

Why suddenly is Software Leasing in the Forefront?

Business software is very expensive, often due to the complexity of it, and this has meant software leasing is viewed in a different light.

Ironically, the way things have gone, the software is now actually often more expensive that the systems and hardware that run it!

Software that is dubbed as expensive is generally what is known as "vertical software". Vertical software produced and programmed for a targeted niche industry like unique point-of-sale software and ERP systems. It is quite common for them to have there own training and support services. The reverse of this is the same product that can be used over a range of industries; these products are generally inexpensive compared to vertical software and can often be purchased off the shelf or in office stores.

A good working example of vertical software in industry career recruitment offices, where a unique, in-house program has to be used, which in turn is also very complex. This software has to deal with candidates/CV's and clients/jobs, and can only be produced for the recruitment sector, as well as being very elaborate.

What are the advantages of Software Financing?

To recognize how software financing and leasing can benefit a specific business, it needs to be understood what the basic plus sides to vertical software are.

Most importantly, this sort of software makes business run smoothly due to the efficiency at which it can perform business processes. The result of this is that a company will end up running more smoothly, at a quicker speed and as an end product, have more lucrative results.

Vertical software is so effective, that they will make the difference in whether a company can stay competitive or not and in some cases is crucial to complete every day operations and to go without it is not an option.

Taking into account these software goods are produced for specific markets and due to their worth in time-saving, it is not surprising they are often expensive. This is partly because of the time it takes a developer to produce a program like this and also because few copies will be sold compared to something like a word processing program, which will be sold in the millions. This then means they must sell the product at a first-rate price which often stretches into five figures.

This then leaves businesses in a catch-22 situation where they need the software to increase turnover, but do not currently have the turnover.

Fortunately, companies in this position can turn to software financing, meaning businesses do not have to purchase immediately.

The huge preliminary costs that are commanded by new software can be eradicated by using software financing and leasing. As well as this, software has been promoted in stature to being seen as an significant asset, like other parts of business equipment. This, in turn, means it can be treated almost like any other hardware purchase, when financing or leasing is carried out.

Financing should not be as daunting as quite often made out, as once software is installed, it can quite easily pay for itself in time, due to the day to day costs being reduced by efficient business processes.

Developers are and have been reluctant and slow to embrace software financing because they want an immediate return for the hard work they have put in.

Due to the old-fashioned nature of the banking industry and ‘stuck in their ways' attitude, in places, banks are similar in their views in software financing.

Luckily for small and medium sized business, 3rd party information technology finance companies are happy to offer alluring software leasing deals.

It works by an information technology company footing the bill in full, and can then supply the software to the business in need. The software will then be supplied to the company by means of finance agreement or lease, and will be at a more than fair rate, which is basically the same as a standard equipment lease.

There are various options on how the lease will end, whether there will be a buyout at the end and similar deals or whether it will just be a traditional fixed rate lease; these will also change from IT finance company to company.

Finally software financing has made an positive impact in the business workplace. Software leasing follows a sound business model, and is becoming a more common practice.