Technology Vendors Loosen Credit Strings for Channel, End User CompaniesBy Jessica Davis | Posted 2008-12-17 Email Print
Looking to increase sales as IT budgets are cut, technology vendors IBM, Dell, HP and Lenovo, all recently sweetened their credit offerings -- with some providing 0 percent financing on certain products sold through solution providers. Software leasing is also on the rise, even as credit markets have dried up and the industry suffers from the global recession.
While some IT solution providers regularly offer financing to end-user companies to help close deals, analysts say it's not the majority. However, over the last year many vendors have seen a growing interest in software leasing -- a form of financing -- and in the last few months several hardware vendors have sweetened their financing offers through the channel.
The moves are considered a way for vendors and solution providers to spur technology spending as IT budgets tighten. The idea is that companies can realize the benefits of the technology today and spread the payments out over a longer term.
IBM, Lenovo and Dell all sweetened the financing pot recently.
In October, IBM introduced the "Why Wait?" technology financing offer, providing 90-day interest-free payment deferral followed by a 36-month fair market value lease with competitive rates on IBM Power Systems and storage either directly from IBM or through IBM business partners to "well-qualified business owners."
In early December Lenovo introduced "LESS" -- the Lenovo Economic Stimulus Solution -- which includes 90-day no payment terms to end customers buying PCs, servers or other products through channel partners. The program is supported through IBM Global Financing and was introduced not long after Lenovo unveiled its ThinkServer line in September.
And Dell has also rolled out zero-percent financing on its EqualLogic storage equipment sold through authorized partners, in a 12 month, four payment offer on qualified orders of $40,000 or more. And HP also recently renewed its program that offers 36-month, zero-percent financing on all HP storage equipment and Proliant blades. Storage is widely acknowledged as being one of the few technologies expected to be impervious to the effects of IT budget cuts.
It's a balancing act for IT vendors providing the access to financing. While they are offering the deals to boost sales at a time of recession and IT budget cuts. But at the same time observers and investors in these public companies are scrutinizing these vendors' finance arms in the aftermath of the credit crisis and subsequent Wall Street meltdown this autumn. Ingram Micro recently reported in its earnings call that SMB loan repayments have remained on track.
Analysts are also keeping an eye out for a rise in bad debt on these companies' financial reports. So far, so good, they say. For example, a report earlier this year noted IBM Global Financing in particular remains on solid ground.
To stay that way IBM Global Financing continues to reevaluate its lending practices, and has veered to greater conservatism recently by dropping its Small Business Flexible Credit program.
But in spite of more careful lending, providers of technology credit say that there is still plenty available to solution providers and their end customers.
D&H Distribution also recently announced that it would increase the credit of selected resellers.
And many vendors and distributors have told Channel Insider that they have seen an increased interest among solution providers in software leasing/financing. IBM documented the increased interest earlier this year, showing a huge leap.