Tech firms offering creative financing

IBM Corp. announced a $5 billion global finance initiative last month in an effort to jumpstart economic stimulus and infrastructure projects in 2009. IBM Global Financing, IBM’s financing business segment, will dedicate $2 billion to the United States and Canada, $2 billion to Europe and $1 billion to the Asia-Pacific region.

The funding targets enterprises and municipalities looking to implement smart technology projects but isn’t designated to any particular industry.

“Certainly there are some industries that have the propensity to leverage this more than others and those would be the industries that are making the bigger investments right now, so health care, for example, and some of the smarter transportation initiatives,” said IBM Canada’s global financing executive Rosemary Walker.

While there is a lot of public sector activity, green initiatives and productivity initiatives in the private sector also stand to benefit, Walker pointed out. “Customers are looking for funding so they can put in place a project today that will deliver productivity and cost savings to their business that might not start to come to them for 12 months from now,” she said.

Financing will take the form of low rates and flexible financing options, deferred payment plans, enterprise financing facilities that offer structured lines of credit and specialized project financing packages. “We’ve got some really creative designs to some of our structures that support the economic conditions of today,” said Walker.

According to IBM, the focus on transformation, as opposed to transaction, sets it apart from competitors like HP Financing, Dell Financial and CIT Group. “I can’t say we are the only company in the world offering financing that would compliment government funding. I do believe though we are the only ones who have made this kind of pledge,” said Walker.

Organizations often have to start their projects before they receive their funding from the government, so IBM is bridging financing in a sense, said James Alexander, senior vice president of the vendor division at London-based Info-Tech Research Group Inc.

“I think it’s a great program and it’s a great thing to be able to talk about because one of the challenges in these big infrastructure projects is just getting the financing in place in time,” he said.

The need to bridge to government funding is more prevalent in the U.S. than Canada, according to Walker. “We are seeing more of that in the U.S. than (in Canada) right now just simply because of the structure of the economic stimulus programs and the difference between the two,” she said.

Having a global program that transcends borders is another unique point, according to Alexander. Most organizations will roll out one program for Canada, another for Asia and the one for Europe might have a different spin, he said. “When you’re talking about big infrastructure projects in big enterprise you have to be cognizant of the fact that they do act globally a lot of the time,” he said.

Cisco Systems Inc. and Hewlett-Packard Development Co. L.P. have also announced financing programs in response to the economic downturn. “At the end of the day, that’s their response to companies saying, ‘We have no more money for capital expenditures,’” said Alexander.

Avaya Inc. recently announced new financing dedicated to unified communications strategies through Avaya Financial Services, a CIT Group Inc. company. The Zero to Sixty program offers zero per cent financing for 36-month finance leases and 60-month fair market value true leases for businesses based in North America. Orders must be placed by September 25, 2009 to qualify.

Financing applies to purchases of Avaya Aura Enterprise, Standard and Branch Editions; Avaya Modular Messaging; Avaya Meeting Exchange; Avaya IP Office 412 and 500 with VoiceMailPro; and Partner systems for businesses up to 100 employees.

Avaya’s financing is very similar to what other organizations are offering as far as zero percent financing and extended terms, according to Alexander.

Cisco announced a series of funding initiatives for channel partners at the Cisco Partner Summit earlier this month, including extended financing from a 60-day to 90-day model through Cisco Capital Finance.

“We’re partnering with distributors on this to improve partner cash-flow,” said Andrew Sage, vice president of small and medium business sales at Cisco. “The plan or model is to sell it, acquire it, install it, bill for it, get the customer to pay for it, and then pay for it.”

According to an Info-Tech survey on Canadian partners conducted in April, 38 per cent reported “halting growth efforts because of the deteriorating economic situation,” said Alexander.

“For this community, an extra 30 days will give them the cash flow they need to run their business and take on more sales opportunities. The fact that it’s free is a bonus that flows straight to the bottom line,” he said.

A lot of infrastructure was built out during the dot-com boom, which means a lot of the gear that is out there in the networking space is either just old and inefficient or at end-of-life, Alexander pointed out. “I think that people like Avaya and Cisco are trying to get at that,” he said.

In late January, HP Financial Services announced zero per cent financing promotions for SMBs in Canada and the U.S. The original April 30 deadline has been extended to July 31.

HP saw “unprecedented demand” for the Zero Per Cent Financing offer, which indicated customer need, according to Anne-Maria Moore, small business segment marketing manager for HP Canada.

“We chose to extend the offer to provide the continued opportunity for our small business customers to invest in technology for the good of their business during these tough economic times,” said Moore.

– With files from Paolo Del Nibletto, Computer Dealer News

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