Channel Chief
“Providing financing for services and software is unique to us”
 Siva Hota, Vice President, IBM Global Finance, India and South Asia, talks about the benefits their financing brings to business partners and customers in an exclusive interview with Tabrez Khan
What are the key differentiators for IBM Global Finance vis-à-vis competitors who may have similar offerings?
Unlike our competitors, we finance purchase of software and services too. Our competitors mostly stick to hardware as their willingness to assess and take risks related to software and services is minimal. More than 50 percent of IBM’s business comes from services, so it’s imperative for us to have a strong services financing portfolio. Typical services financed by IBM Global Finance (IBM GF) are IT consulting, data center buildup and call center buildup.
Another way we try to differentiate ourselves is by enabling smaller companies to use our financing solutions. Bigger companies that have good credit rating can easily access finance during tough times, but smaller companies find it difficult.
Our deep understanding of technology helps us to correctly assess the risk and upsell opportunity in any deal—regardless of the size of the customer involved—and make the right lending decision.
What’s the minimum deal size that you finance, and how much of IBM component is required to qualify for financing?
Although our minimum deal size is $25,000, that is just an indicative figure because we do finance deals below that amount. We can customize a finance deal depending on the customer and the type of implementation. For SMBs which may be facing budget constraints, a lack of demonstrable ROI, and fewer sources of financing, we finance deals between $5,000-$25,000. There is no fixed requirement for an IBM component in the deal. Sometimes we finance deals involving the sale of PCs and notebooks—which obviously are not IBM products—but we are okay with financing them.
What are your initiatives as far as commercial channel financing is concerned?
We work with a lot of IBM business partners, and it’s our endeavor to support them with short-term working capital and help them to sell more by removing the capital constraints that could hamper their business. For partners we do receivables financing, payables financing and inventory financing.
One of the initiatives we are currently planning is to finance services provided by partners; this includes IT consulting and deployment-related services. Partners are keen on driving services to enhance their revenue, and we are assessing how we can best support them to achieve that.
We are also thinking of involving partners in reselling used equipment, but that is at a very early stage.
Do you think there’s a serious market for used equipment? Where is the demand likely to come from?
The demand arises from up-and-coming companies in special economic zones where a lot of them are situated. They do not have the resources or the eligibility to get funding for new equipment, so buying used equipment at affordable rates is a good option for them.
One of our business lines is to lease new IT equipment to customers for a certain period, and when that period is over it comes back to us. We either dispose it part-by-part or sell it, depending on its suitability for re-use. This is also an environmental imperative—we have noticed that many customers simply stack IT equipment in closets once they phase it out and go for a refresh.
With working capital requirements increasing as vendors squeeze the credit period for channel partners, your services must be even more valued by partners.
Yes. Today, vendors are reluctant to offer credit periods of more than 15-25 days whereas it could take 45 days or more for a partner to sell a particular piece of equipment. That’s where our inventory financing services come in. We offer up to 100 percent financing of eligible inventory with a no-charge financing period up to 75 days for approved manufacturers, and discounts for payments received within 15 days.
Our inventory financing applies to product and software sales from both IBM and non-IBM manufacturers, suppliers and distributors.
How would you assess the Indian market in terms of technology financing?
The economic slowdown has been a silver lining for tech financing in the Indian market. Earlier, a lot of organizations did not realize the power of financing for technology to grow their businesses.
Companies that were cash-rich would decide to invest in new technologies, while others would simply hold back due to lack of cash. However, the slowdown, which made even cash-rich companies borrow for the use of technology, brought home the impact of financing.
Customers realized that the lack of cash was no impediment to investing in new technology solutions and equipment which were key aids for business growth; also, that available funds could be diverted to other business purposes instead of blocking them in IT equipment purchase.
IBM has been luring Sun-Oracle partners with financing offers.
In April, we allocated nearly $500 million to provide channel financing to credit-qualified Sun business partners who were willing to work with us to migrate their customers from Sun to IBM. This type of financing is for partners to help them with working capital needs. With this financing option we have helped more than 100 Sun partners to either grow or establish an IBM reseller business within their organizations. |