Leasing software

[Sean Seunghwa Yi]

Here in Korea, people don't use software leasing program. I wonder how corporate and personal users in US and Japan use leasing program. Is it operating lease? What's the lease term? Who is the big player in this area? Which segment of software is mostly leased?

[Frans Jansen]

Hi Sean,
To the best of my knowledge, software leasing hardly exists. After all, software companies do not pass legal title (of the intellectual ownership) to a lessor - they wish to retain this title so perhaps only captives of software companies could perhaps enter into transactions where software is being leased. What you do see, however, is software financing (and often called: software leasing but that's merely for marketing purposes): a leasing company discounts a stream of unconditional, irrevocable and non refundable receivables and the sofware user is being requested to pay this assigned stream of receivables to the financing company. In a best case scenario, the financing company could perhaps claim that -in case of default of the lessee, the software could be used by a third party (so that they could trade the usage of the software). Best regards, Frans

[Sean Seunghwa Yi]

Thanks, Frans. I got your point. BTW, in Europe, what's the most frequent software financed? Is it operating system, office product or corporate packages like CRM or ERP tools?

[Frans Jansen]

Sean,
I guess that MS and SAP are the largest - MS is being run as a captive, SAP is run by Siemens Financial Services. Best rergards, Frans

[Remco Timmermans]

I recently worked at Oracle Financing, which considers itself the top player in software leasing. However, as correctly and clearly explained by Frans, the most used contract is a payment plan agreement (PPA), which is really a form of financing and not a lease as we know it in the equipment leasing world. Nevertheless Oracle does offer a term lease agreement (TLA), which in certain jurisdictions (not possible in all countries) may under certain conditions be classified as a lease. This contract may contain a residual value and will have end of term options similar to those in equipment leasing.

Types of software being financed under this construction can really be anything. Oracle will finance all of its offerings, ranging from databases to all sorts of application packages, including ERP and CRM. Prices of these packages vary from a few thousand dollars to multi-million dollar installations. In case of Oracle software the financing usually includes support payments for the duration of the financing contract. At Oracle the support fee is a fixed 22% of the software price per annum.

[Charlie Bancroft]

Have you tried ECS Financial...Shari Lipski's firm.....don't know what your requirements are...but you can pick and choose what you want/need in the way of Lease servicing.

cheers from charlie..... [e-mail]