In the not too distant past, it was easy to determine your approximate net worth as an individual. For the most part it was a simple process: add up all the money in your bank accounts and investments; add in the current, liquid value of fixed assets; and subtract out any mortgages and loans. Those were the days when we “owned” things and consumer lending was much tighter, when “the more toys, the wealthier the person.” Yep, a much simpler time.
Today’s must-have mentality, fed by ubiquitous “keep up with the Joneses” advertising, has replaced yesteryear’s pride of ownership with paycheck-to-paycheck liquidity.
A great example of this societal change and relaxed consumer credit is how people line up for the latest and greatest phone costing hundreds of dollars at a local Costco phone kiosk. In a matter a minutes, with minimal credit checks or a credit rating, these people bind themselves to a multi-year service/payment program with huge termination fees.
From houses, vacation properties, cars, boats, and recreational vehicles to cable TV, cell phones, mobile devices and now SOFTWARE (have you tried to purchase a copy of Microsoft Office for your new device lately?), we have become a pay-as-you-play society. Do we really own anything anymore or do we just rent everything?
You’d think the calculation of net worth would become a whole lot simpler–but does it?
It is simpler because the majority of our paycheck goes to covering the pay-as-you-play stuff, so there is less to sum up in the saving and investment accounts. It is simpler because we need not include the stuff we don’t own as assets.
But what about our debt?
Big items like home mortgages and car loans (both of which actually have current asset value and can be sold) are quick to calculate. But what about all those binding agreements with the “easy monthly payments” and the cancellation fees? Technically, these financial obligations are debt.
Just this past week I watched with interest a news story about a three-year battle between a major cell phone carrier and the mother of a deceased daughter. Even though the mother had provided a death certificate to the credit department of the cell phone carrier within months of the death–and even though the mother was not a co-signer to the agreement and the daughter had been of legal age when she signed up for a new phone on a three-year agreement at a local mall kiosk–the collections department’s harassment never stopped!
So what is my point?
This: While pay-as-you-play pricing models make purchasing decisions easier, they don’t lessen obligations associated with those purchasing decision.
In the world of corporate software, cloud computing is all the rage. Software-as-a-Service (SaaS), also known as hosted or cloud-based pricing, makes elaborate and expensive software plus the required operating infrastructure very affordable through monthly service fees. The terms and conditions of these service agreements vary, but in a corporate world they have finite value and thus limited financial exposure. What was once a very elaborate and time-consuming capital expenditure process has become a much simpler and quicker expense-line decision.
But this is only half the story. Corporate software requires implementation and training in order to maximize the return on investment.
Responsible software vendors like Spitfire Management recognize and actively promote the value of proper and sufficient implementation and training to new clients. Yet, as the saying goes, “you can lead a horse to water but you can’t make him drink.”
Executives who fail to allocate sufficient resources, properly fund and hold staff accountable for the outcome of the implementation and training process have, in effect, evaded their obligations associated with the software purchase decision.
So while the purchase decision is easier, the obligations have not changed. And you should never forget your debt or obligations.Tweet