Sale-to-Service

Sale-to-Service®, also known as an S2S®, is a patent-pending (investment) origination process and investment structure in which a business sells its mission-critical, server-based, intangible assets, and enters into a contract (services agreement ) for ongoing access to and use of the sold assets. The Sale-to-Service® and S2S® terms are registered trademarks created to distinguish a Sale-to-Service® from sale-leasebacks and operating leases of tangible asset and intellectual property (IP) sale-license backs.
== Service Economy ==
Much of the world’s economic activity has transitioned from an asset-intensive industrial economy to an asset-light service economy. Ocean Tomo, an intellectual capital merchant bank’s study on intangible asset value determined that physical or tangible assets comprised more than 80% of the S&P 500 Market Value in 1975 but in just 40 years the percentages had reversed. A key driver of this growth can be found in the use of technology and data, which are also described as mission-critical, server-based, intangible assets.
== Mission-Critical Server-Based Assets ==
Mission-critical server-based intangible assets generally take four different forms:
* Software as a Service (SaaS): This software sits on the software provider's servers and cannot be moved from that location. Examples include Salesforce, NetSuite, Microsoft Dynamics, and Shopify. SaaS businesses in and of themselves are not a fit for a Sale-to-Service® but a SaaS solution used by an operating business may be a mission-critical depending on the level of customization specific to the business.
* Premises-based Enterprise Resource Planning (ERP): ERP is licensed software for which the customer can decide where to host the technology. Hosting can be on servers owned by the company, in a data center, or in the cloud which includes hosted solutions on Amazon Web Services or Microsoft Azure. Examples of larger ERP providers include SAP, Oracle, and Epicore.
* Proprietary Systems: These server-based assets are unique to the company. Companies with proprietary systems are often described as tech-enabled. These server-based assets can sit on servers owned by the company, in a data center, or the cloud.
* Data: In the context of a Sale-to-Service®, information that sits in a data center or the cloud is also a server-based intangible asset. Data is often essential to a company’s operations and examples include SKU, invoice, tracking, customer ID, and regulatory information or other data that is essential for the company to deliver its products or services to its customers.
== Sale-to-Service and Valuation ==
Mission-critical, server-based, intangible assets generally have little to no value on a company’s balance sheet but these assets contribute to enterprise value. In an acquisition, the value of these intangible assets is often attributed to goodwill. A Sale-to-Service® values these assets not based on their book value but based on their contribution to enterprise value.
== Sale-to-Service® vs Sale Leaseback and Operating Leases ==
Physical control of the assets and payment contingent on service are two primary items that distinguish a Sale-to-Service® from a sale leaseback and operating lease. 
Physical Control: In traditional sale-leasebacks and operating leases, the leasee has physical possession and control of the leased tangible asset, often real estate or equipment. In a Sale-to-Service®, the customer does not have physical control of the assets because the assets are intangible and reside on a server generally in a data center or in the cloud. 
Services Agreement: In traditional sale-leasebacks and operating leases, payment to the lessor is largely if not entirely fixed. In a Sale-to-Service®, payments are contingent on the performance of a service, and if the service is not delivered, payment is not due.
== Sale-to-Service® vs Intellectual Property (IP) Sale License-Back ==
An intellectual property sale license-back financing is similar to a real estate sale-leaseback where there is an ownership change but rather than a lease, the seller pays a license fee or royalty fee for ongoing use of the intellectual property asset. A Sale-to-Service® is similar to an intellectual property sale license-back but rather than paying a license fee or royalty fee for ongoing use of the assets, the seller pays a service fee which is contingent on the performance of a service, and if the service is not delivered, payment is not due.
== S2S® ==
S2S® is an abbreviated term for Sale-to-Service® and is a registered trademark.
==Leeward Capital Management, LLC==
Leeward Capital Management, a Dallas, Texas-based specialty finance business, has exclusive use of the patent-pending Sale-to-Service® origination and investment structure and use of the Sale-to-Service® and S2S® trademarks. 
== Refrences ==
Category:Software as a service
Category:Proprietary operating systems
Category:Software by license
Category:System software
Category:Proprietary software