Improved cash-flow

Sometimes the service provider will be obliged to pay for assets that are transferred from the client. Payments have frequently been made to cover property, computer hardware and other related equipment, software licences and transport. The logic behind this arrangement is that the provider then uses these assets to provide the agreed or part of the agreed service. Less frequently payment has been made (usually quite small) for items appearing under headings such as ’Goodwill’. Typically this occurs when the provider takes the asset but has little or no use for it. In effect both parties accept that new improved assets will be necessary very early on in the arrangement.

In some outsourcing arrangements an injection of cash is just another benefit to the client. In others, however, the outsourcing deal appears to have mainly come about because of the client’s need for new short-term funds.