Give me, give me, give me… more financial leverage!

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The trick is to make the transition as smooth and painless as possible.’ Jon Davis 3 Step IT.

If there's a silver lining here in the Middle East to the economic correction being experienced around the world, it is the adoption of IT asset management instruments including Basel II and Sarbanes-Oxley to track, maintain and replace equipment to ensure ROI and leverage that all important liquidity.

Compliance with regulations such as Basel II and Sarbanes-Oxley, and the requirements to furnish shareholders and regulators with accurate records of IT assets for financial control and information security, are key elements in securing funding for leased IT equipment in Europe and the US, and are only just emerging in the Gulf as tools to leverage finance to maintain and enhance business critical operations. Never has the Gulf had to look at its business model more closely than now, says a leading business analyst.

"Before underwriting a lease we make an initial assessment of an organisation's asset management in trading, profitability and ability to identify and control trends in asset utilisation and/or values of a customer's business," says Matt Bowyer, head of asset management at Barclays Asset and Sales Finance division.

"In circumstances where we assess this issue to be critical," Bowyer continues, "we would expect to see sound evidence of good asset management being practiced, and an experienced team of customer auditors would be used to follow the audit trail. Evidence of all necessary monitoring and controls procedures would form part of the overall risk assessment of any lending proposition," explains Bowyer.

The risks associated with any potential economic downturn would be factored into the risk assessment. Systems would also be put in place to monitor compliance and ensure action if a significant downturn affecting trading or profitability should occur."

Sector positives - operational leases

The global downturn has, however, thrown up some positives in the financial sector. "For sure," says Kevin Cleary, general manager of worldwide global asset recovery services (GARS) at IBM Global Financing, "we have experienced increased activity as end-users look to operational leases to free up cash flow for other parts of their operations, while enabling them to maintain and upgrade business critical IT equipment. We've also seen a spike in new business, again to free up cash flow."

But, says Cleary, IT asset management (ITAM) competency in organisations is a mixed bag. "It really is a lottery; there is no rule of thumb, whether that's a big bank or an SME. Some have multi-platform legacy systems with poor functionality, security and compliance. Some use bar coding to track assets. Other organisations have implemented secure single-platform next-generation transparency enablers whereby leases, loans and wholesale/inventory finance are all managed from a single visible platform, which operationally is what you want."

Re-engineering and investment

Jon Davies, country manager at 3 Step IT, agrees, adding that implementing an ITAM system requires investment and involvement throughout the organisation with an element of re-engineering and integration.

"The trick is to make the transition as smooth and painless as possible through flexible leasing and finance solutions. Ease of maintenance is also an important factor. In the past nobody wanted to laboriously maintain and update data on an unwieldy and often inaccurate off-system spread sheet. Next-generation platforms are secure and simple to use, while software applications can be accessed online or on disk. And if needs be, the data can be accessed and tracked by facilities managers and the lender."

But there are issues surrounding software, primarily around standardisation. "This is the hot topic," says Steve Paterson at leasing software company International Decision Systems. "No one has yet written a cross border solution, primarily due to differing tax, VAT and lease agreement status."

Optimising IT assets

For any organisation, IT is business critical. The hardware, software and other advanced technology on, or connected to, desktops and data centres and so on, constitute a significant proportion of budgets: an enterprise's IT estate can often account for 50 percent, according to Forrester Research.

"In a distributed computing environment most enterprises' IT assets are decentralised," notes Cleary. "Knowing how many assets you have, which are owned, leased or licensed, where they reside, who is responsible for them, what the current financial obligations are for each asset and refresh schedules, are all key to a FM's ITAM strategy."

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