Software, Software Everywhere

By: Andrea Zana  
March 11th, 2019

Software Troubleshooting for Businesses

When your iPhone starts acting up beyond your willingness to research a solution through dozens of on-line user groups, you can head to an Apple Store or another Original Equipment Manufacturer (OEM) licensed repair shop. When your car displays mysterious faulty codes but is still normally drivable, you can schedule a service call for the weekend. However inconvenient, these software-induced faults in personal equipment intertwined with our lives are tolerable, as they neither prevent us from going about our daily routine, nor harm our safety.  But what if a business owner experiences a software issue in a mission-critical piece of equipment that proves impossible to troubleshoot in a timely fashion?

What Is OEM Software?

Today, proprietary and non-user serviceable OEM software is required (and expected) to drive an increasingly meaningful proportion of any machine’s capabilities, from most irrelevant to critical.  Companies experienced in operating sophisticated equipment such as Computer Numeric Control (CNC) machines and IT systems are already well acquainted with dependency on proprietary software control systems.  Other sectors operating in demanding outdoor environments such as transportation, construction and agriculture still need to prepare themselves to deal with this new, nearly invisible, yet critical business variable.  And so, do equipment finance companies, as underwriting commercial equipment leases based on traditional business, financial and industry risk metrics may soon not suffice anymore.

Some states are seeking to enact Right to Repair acts to provide customers with broader and less expensive options to repair consumer electronics in third-party shops.  Automotive OEMs have also recently made available many diagnostic tools to independent dealers.  Progress in other industries and equipment types, such as tractors and trucks, has been elusive at best, primarily due to OEMs’ legitimate reluctance to broadly share their intellectual property with out-of-network technicians (not to mention hackers) and the risks of letting third-parties maintain and upgrade highly complex and interconnected vital control systems.  But at some point in the future, a truck driver who experiences an incomprehensible software fault that shuts off his truck in the middle of a cold Nebraska night on I-80, or through the tunnels of Glenwood Canyon on I-70, needs to know that the situation will be readily handled just like a mechanical fault is taken care of today, so that he or she can drive off with as little downtime as possible.

Software Problems and Solutions

Eventually, a combination of open source systems; fast and secure nationwide data and service provider coverage; and operational rules and (hopefully) practical regulations governing equipment operations in degraded software mode will institutionalize and embed software in all industries and largely eliminate these concerns.  However, we are only at the beginning of this transition period.  In the meantime, faced with the ever-growing pervasiveness of critical software content in every piece of equipment, both business owners and equipment finance companies will have to evaluate not only the deriving benefits, but also the potential costs and risk, in their equipment purchase and financing decisions.

To remain relevant in an increasingly software-controlled market, customers and equipment finance companies will have to consider together a new set of underwriting and decisioning variable, such as:

  • Understanding how the customer is required to maintain, update and upgrade OEM software and the adverse impact if he or she does not.
  • Assessing how the condition and upgrade potential of software and related hardware (processors, sensors, etc.) impacts the equipment’s productivity and long-term value.
  • Notwithstanding the hell-or-high water nature of leases, determining what is a customer’s practical level of responsibility and ability to continue performing under the financing agreement when a faulty OEM-imposed software upgrade impairs the equipment, or a security breach opens the door to hackers.
  • Assessing the OEM’s ability and willingness to ensure that all personal data and software from the prior owner is wiped out with no loss of asset functionality (and therefore value) prior to a resale.

Software and the Future of Equipment Finance

Undoubtedly, the growing presence of software in all equipment will require equipment finance companies to develop an even closer commercial relationship with OEMs and vendors, as well as a new level of in-house subject matter expertise to understand software-driven business models: especially, when facing an increasingly complex environment constantly seeking higher efficiency and productivity through millions of lines of code.

About the Author

Andrea is AmurEF’s Chief Risk Officer and is also directly responsible for overseeing all financing in the transportation, logistics, energy and industrial verticals, as well as in the mid-ticket space. He was most recently a Director at CIT Maritime Finance, a group he helped develop within CIT Group dedicated to lending and leasing in the maritime sector. Previously he was a Vice President of CIT Transportation Lending with coverage responsibilities in the aerospace, defense, rail and domestic shipping sectors. He was formerly a Research Associate at UBS covering U.S. domestic airlines and held numerous roles in transportation investment banking and structured finance at Lehman Brothers and Morgan Stanley.


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