Gautam Munish, Vice President, Cisco Capital India
In order to compete successfully in today's business environment, companies recognize that they have to be diligent in making the most of their resources. Businesses, regardless of size, are now trying to preserve both the cash they have on hand and their credit lines which places more scrutiny on capital equipment purchases. Companies that want to stay on the cutting-edge of technology even in these trying times must strike a fine balance between acquiring the latest technologies and safeguarding their capital expenditure budgets. For such businesses, financing is one of the best ways to stay competitive.
Larger companies, owing to their strong clout, are generally able to raise required capital from financial institutions. Companies in the SMB sector however, have fewer options for accessing capital and often face resistance from traditional lenders. This sector has been struggling to keep up with market transitions.
Financing and leasing offer companies an alternative, flexible method for acquiring technology. Financing allows for the spreading of costs over a period of time with predictable monthly payments that ease cash flow, the protection of capital, and the preservation of other lines of credit. Financing has also become increasingly important as businesses look to be more strategic with budget and technology investments. Businesses are rapidly realizing that the decision about how to acquire technology and services is just as critical as the investment decision itself. Gartner, in a recent report, noted that through leasing, total cost of ownership (TCO) is lowered as IT hardware and software standards are introduced and companies begin to proactively plan life cycles for IT assets. This augurs well for SMBs.
By utilizing flexible solutions to finance technology investments that spread the cost of new technology and services over time, businesses can maximize cash flow and conserve capital budgets. Deciding to finance technology and services can ease the uncertainty of future technology developments and their impact on business planning.
Financing can also provide the flexibility to upgrade to new technologies as the business demands. Most importantly, financing solutions make it possible to proactively establish a technology lifecycle management strategy. This, in turn, offers a business opportunity for channel partners.
Customer Financing: An Emerging Channel Opportunity
As channel partners continue to evolve their businesses from "provisioning" to delivering fully integrated "customer solutions," it is a natural next step to expand the "solution" to include a customer financing component. Now, instead of talking about what the solution costs, the dialogue expands to "What value does the solution bring to the customer's business?" and "How can we map the monthly cost of the solution to its business benefits?" Elevating the dialogue to this strategic level opens new strategic frontiers to channel partners who are ready to work with a customer's business and technology leadership.
By investigating the financing options, tools, and resources available in the marketplace, channel partners can actively increase profitability. For example, Cisco Capital offers a selection of resources that resellers can leverage to grow their businesses. One example is Cisco Capital's 0% Progress Payments program. This program allows Cisco channel partners to be paid during Cisco Unified Communications customer deployments at set intervals and extends favorable interest payment terms to customers. The Cisco Demo Lab Lease Program, on the other hand, allows solution providers access to the latest Cisco solutions in the marketplace at reasonable not for resale (NFR) prices.
However, partners must address the challenges that hinder them from availing of such options. To begin, partners need to have strong financials and transparent reporting which is currently lacking among a large number of partners. Lack of financial planning is another issue. There is also a misconception that availing of loans can create an interest burden on the already dipping bottom-line. Partners must realize that smart financing enables them to improve their capabilities, benefit from new opportunities and speed growth. Moreover, they need to train their staff to be able to closely understand customer expectations and build their proposals to meet specific customer needs. In times when buying decisions are limited and business budgets have been cut, the channel partner should be able to speak the language of the CFO and effectively incorporate financing into every deal. This develops the partner into a strategic thinker and advisor role.
Better Options from OEM Providers
There can be some major advantages in dealing with OEM financers. Vendors have a deep working knowledge of their technology and its potential benefits to the customer, enabling them to provide financial advice on IT and business strategies. They also have an intimate knowledge of technology lifecycles, as well as an understanding of the impact of new and planned technology developments. As a result, they can provide customers with informed advice on investments that are future-proof and help them to plan their strategic business roadmaps. Customers also need to take into account the total cost of ownership over the life of the asset. The true cost of a technology solution goes beyond the cost of the hardware. It includes software, deployment, servicing, maintenance and financing. By adopting a more formalized approach to acquiring technology, they may be able to reduce ongoing costs, improve productivity and maximize assets.
In essence, leasing and financing allows for a longer-term discussion with customers. They also give channel partners the opportunity to help customers plan for the long term and create financing structures that allow them to easily upgrade or add equipment over the course of the lease. Resellers can then effectively manage accounts without having continued price objection conversations.
Leasing and Financing are not new in the technology industry. They are, in fact, very common practices for the acquisition of IT network infrastructure and telecommunications equipment in the developed world. In these mature markets, where technology obsolescence happens rapidly, this model makes strong financial sense, and channel partners have been profitably providing this service to their customers for quite some time.
It would then only make natural sense for networking channel partners in India to closely examine financing offers and programs from their vendor partners and to begin to learn how to have meaningful financial discussions with their customers. By taking the requisite steps to grow this area of their business, channel partners will be rewarded with a tighter alignment with their customers and a solid strategy for increasing revenue streams and profits for their business.
Cisco Capital India