Channel Chief
“We can enable lower TCO through financing”
 Gautam Munish, Vice President, Cisco Capital India, gives an overview of the company’s financing services, in an interview with Tabrez Khan
What was your experience during the slowdown when many customers and partners may have been forced to rely on your services?
Our credit offtake even during the worst phase of the slowdown remained unchanged. But most of the customers were added prior to the slowdown, so it would be incorrect to say that the slowdown increased the offtake.
Partners have started seeing more value in working [regularly] with Cisco Capital rather than relying on us only when a customer mentions a budgetary constraint. There have been no major cases of defaults, just minor delays in payments and other small hiccups.
Technology financing is still a new concept. Are businesses warming up to it?
Until a few years ago, companies preferred to buy IT equipment with their own cash. However, recognizing the lower TCO that Cisco Capital can enable through financing, they have considerably warmed up to this concept. Cisco has various levels of customers, all of whom are increasingly making use of financing. For example, in the case of government contracts in e-governance initiatives such as the state wide area networks, all vendors bidding had to agree to staggered payments. Even several cash-rich PSU navratnas today ask for both staggered payment and upfront payment options in their tenders. In most cases they end up finalizing their L1 on the basis of the lower TCO offered by the staggered payment option.
In the commercial segment, companies are cash-constrained, and a lot of them avail of our service to deploy Cisco technologies and platforms which they would otherwise not have been able to afford.
Tell us about the financing options Cisco has rolled out in the last 12-18 months.
We have lowered the financing threshold to Rs 10 lakh. This allows even smaller customers to use the financing option. This includes, financing of non-competing active and passive components that impart functionality to the overall project. However, the overall funding ratio has to be 2:1 in favor of Cisco products.
We have a number of financing options. Our EasyLease program is designed for commercial and SMB customers. We have a zero-percent financing option for SMBs for multi-year service contracts around our branded service offerings like SMARTnet. There’s also a six-month deferral scheme wherein customers can defer payments for up to six months with interest accruing during the deferral period added to the total amount financed. This is applicable to all Cisco technologies, and is subject to minimum funding requirements.
We have also been offering special financing for unified communication (UC) solutions where customers don’t have to make any payments and don’t incur any interest costs during the deployment phase. However, the partners get paid up to 80 percent of the amount financed prior to the deployment of the UC solution. We have also created a financing program which provides a 36-month payment plan for certain WAAS solutions. Finally, the Accelerate to Collaborate program offers attractive lease options for qualified deals that include a Nortel or NEC trade-in under our TMP program. For such deals, customers pay very low interest—0 percent for the first 24 months, 1 percent for 36 months, 2 percent for 48 months, and 3 percent for 60 months.
You have also introduced channel financing.
Yes. We have short-term channel financing programs termed Net-30 and Net-60, and also long-term channel financing options for periods of 1-5 years. Our mandate is to support longer tenure transactions. While channel financing is facilitated by us, it is not written in our books.
What’s the total corpus available to India? How many partners are covered under Cisco Capital services?
There’s no specific corpus. The funds are made available from Cisco Inc as per requirements. With regard to total funds disbursed, we have a policy not to disclose it.
All our tier-1 partners, except for one, are covered under Cisco Capital financing. In tier-2, we have between 60-70 partners who regularly use financing options. After we started, in the first year, the attach ratio was only 4 percent. In the last fiscal, 24 percent of the deals signed by our key partners had one or the other financing component attached. Many of our tier-2 partners have told us that if the financing option had not been there they would not have got a lot of deals. Financing is also allowing tier-2 partners to compete with tier-1 partners on large deals.
What are the benefits of financing to partners?
Resellers are now being asked to become real business partners rather than just box-pushers. The game is changing in favor of partners who can deploy some of their own skills, and share some of the risk and rewards. Our credit delivery to partners helps them put together solutions
they can sell to customers instead of just offering them point products. Partners are collaborating with vendors to offer solutions on set KPIs and SLAs to customers, and to get paid as the customer grows as per defined milestones.
It’s a win-win situation for all the parties involved. |