Publication Date: June 2007
As IT companies become more globally integrated and trade efficiencies become more critical, technology manufacturers and suppliers need to identify new ways to innovatively fund their growth agendas.
Traditional methods of IT financing, which may include a regular trip to the bank for a cash loan or line of credit, are currently being replaced by a more thoughtful, logical approach. Information technology vendors and manufacturers understand that if they are to deliver on their stated business objectives they need to leverage financing as a core facet of their go-to market strategy for their customers. In addition, the financing offerings must be flexible to meet the specific needs of technology providers. And most of all, instead of spending the millions upon millions of dollars to build up the infrastructure themselves, vendors should investigate a strategic partnering with a trusted, global IT asset-based lender, who understands technology.
According to Joseph Pucciarelli, director of technology financing & management strategies at IDC Research, as IT technology continues to grow in sophistication, other types of equipment have become increasingly IT-centric, such as point-of-sale devices, medical imaging equipment and communications hardware. Together, he says, they fuel a worldwide leasing and financing market that exceeds $125 billion annually — an incredible market opportunity by every measure.
Asset-based lenders like IBM Global Financing (IGF) understand money, but unlike traditional bankers, they also understand technology. In the case of IGF, the financing division of IBM, technology is in our DNA. IGF understands the complex issues involved in the introduction, implementation and maintenance of technology. We “get” the crush at the margins as IT vendors go to market within their channels and have to wait as much as 90 days to get paid from resellers. And we have unraveled the strangled procedures that wrap around the proper reclamation, disposal and reuse of obsolete equipment in a fast changing regulatory environment.
What makes us unique is that IGF’s products and capabilities span the entire life cycle of the technology industry: supplier financing, distribution financing, customer financing, re-manufacturing, recycling and disposition services. Not to mention, IGF has 125,000 existing clients in more than 50 countries that may seek to benefit from solutions being developed by a new technology vendor who is aligned with a financier they trust and are already doing business with.
For more than 25 years, IGF had been perfecting its financing capabilities for IBM’s own equipment, software and services solutions, garnering attach rates as high as 86% for many of our market-leading IBM servers. This is the next logical move in its evolution — turning itself inside-out and bringing its market-leading financing capabilities and best-of-breed leasing, settlement and collection practices to bear in the marketplace for the express benefit of its own customers and business partners.
In 2006, IGF embarked on a strategic expansion of its vendor financing business, offering financing capabilities to manufacturers and suppliers in fast growing technology industries, including telephony and telecommunications, mobility solutions, RFID, and power and cooling technology. The roots of its evolution may have originated some two years prior, shortly after the sale of the IBM PC division to the Lenovo Group. Back then, IBM announced a five-year agreement to provide customer financing to end users and commercial financial services to business partners for the newly branded Lenovo line of Thinkpads.
Over the past ten months however, IBM Global Financing has announced a series of deals, which dramatically demonstrate the expansion of its financing business. They include agreements with TechData, AbsoluteSKY, Juniper Networks, Symbol Technologies, (now Motorola Mobility Solutions), APC-MGE, (formerly American Power Conversion) and InfoPrint, the new joint venture developed between IBM Printer Division and Ricoh. These vendor financing deals represent one of the largest extensions of IBM’s Global Financing business since the company first began offering equipment leases on IBM PCs and servers in the mid-1980s.
With APC-MGE, for example, IGF entered into an exclusive agreement to provide worldwide leasing capabilities for their customers. The program gives APC-MGE customers additional flexibility to facilitate the purchase of APC’s best-of-breed solutions, such as the company’s award-winning InfaStruXure architecture for data centers.
Dave Johnson, APC-MGE’s chief sales officer, sees the opportunity to provide variety as a key benefit to his clientele. “By providing more options to acquire APC’s industry-leading, real-time infrastructure solutions, makes it easier for our customers and our reseller network to get the technology they need to be successful,” he says. “Customers looking to finance large projects or those who just need some assistance in acquiring our solutions can capitalize on the programs now available from APC-MGE.”
One such APC-MGE customer, Scott & White, the largest multispecialty hospital practice in Texas, praised the IGF-APC-MGE alliance for the flexibility it afforded to bring additional capacity into the company’s data center when it remodeled and expanded its facility. “The alliance helped address our needs, which were very specific,” explains William Roe, Scott & White data center manager.
With IGF’s expansion into vendor financing, vendors and suppliers can finally leverage the strength of IBM’s world-class financing expertise as they go to market with their own solutions. IGF’s financing offerings are enabling these vendors to appeal to a wider variety of businesses looking to maximize returns on invested capital, while simultaneously driving sales and providing market differentiating, budgeting flexibility for their clients.
With an asset base of nearly $34 billion, IBM Global Financing is best positioned to provide financing expertise to new vendor financing partners. Vendors can benefit through association with IGF’s pre-eminent presence and track record in financing customers on a global scale. IBM Global Financing expansion efforts bode well for vendors and suppliers especially, as they outreach to mid-market companies. A solution in the tens of thousands or even thousands of dollars may be too large for a one-time expenditure for an SMB.
However, that same proposal backed by IGF financing can mean regular monthly payments and an easier sell for a manufacturer, as well as a profit-building opportunity for resellers. Working closely with IBM, vendors can simplify and tailor the entire financing process, while providing a range of attractive, affordable financing options that could also shorten the sales cycle dramatically and accelerate growth opportunities.
Finally, as technology fades to obsolescence, IGF has built up a robust, global asset recovery operation that can help vendors collect IT equipment in centers around the world and minimize data security and environmental risks. IBM Global Financing invests more than $100 million a year in the infrastructure, people and processes behind its Global Asset Recovery Services (GARS) business, which helps end-users manage the disposal of their equipment at the end of lease in an data secure and environmentally friendly manner, thereby preparing the way for the next cycle of technology refresh and repeat business for vendors in the program.
IBM Global Financing’s business expansion is representative of similar moves in other parts of the IBM business. At IBM, we began to sense the new possibilities for innovation, as we worked with our clients to help them become more agile, more responsive, and more adaptive or on demand. Today, IBM provides clients with an unequaled depth and breadth of technology, expertise and experience — combining them all to produce real results. We have done so for businesses and institutions of all kinds and sizes around the world, enabling them to make both a profit and a difference. IBMers call this “innovation that matters.”
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