Financing For An On-Demand World

Sept. 29, 2005
Where technology and strategy intersect.

John Callies is general manager of IBM Global Financing.

No matter the size of your company, your industry or the scope of your IT project, innovative and flexible financing solutions play a crucial role in acquiring the technology needed to stay competitive and on budget.

Whatever your goal -- conserving cash, customizing financing solutions for unique and changing business needs, optimizing the value of assets throughout the lifecycle, or all three -- financing is a simpler, smarter way to manage your IT strategy.

What It Means To Be On-Demand

Becoming on-demand means making your business more productive and innovative so that it can respond dynamically to market forces. It also means having the IT capacity you need and new options for how you acquire that capacity. Financing enables you to:

  • Accelerate deployment
  • Ensure high levels of flexibility
  • Reduce risk
  • Improve the return on investment

Helping Small Businesses

Small businesses remain one of the fastest growing markets in the IT industry with analysts predicting they will spend more on technology in 2006 than they did during the dot-com boom. Given cash constraints, leasing is often the catalyst that enables them to acquire the technology they need and achieve payback in a shorter period of time.

IDC analyst William Roch comments, "How businesses handle the expense of IT hardware, software, and services is often a determining factor in when and whether they can acquire the new technology necessary to sustain business growth while improving productivity." Roch explains, "For smaller organizations, an expenditure of $1 million for a server and storage upgrade may have to compete for the same budget that would fund a sales force expansion designed to increase revenue."

Financing provides a way to achieve greater operational, strategic and financial performance because it makes the use of new technology more affordable on a limited monthly budget. Fast-growing companies that don't have extensive credit histories may also be able to acquire equipment more quickly by leasing.

Financing And Beyond

IT financing goes beyond PCs and services. Network financing provides a great example. When installing new routers or switches, adding nodes to boost capacity, implementing WiFi networks or switching over to VoIP telephony, you can better control costs, improve cash flow and manage your investment when you lease.

Networking systems tend to have a long life cycle due to their expandability and upgradeability. That's when a fair market value lease, with terms of 36 to 60 months and with flexible payment structures that can match your payments to your cash flow situation, would make sense.

Financing also acts as a management strategy to facilitate the replacement of old equipment. Data confidentiality is an issue to consider when you purchase, since technology will eventually outlive its usefulness and require disposal.

When Cummins Inc., a leader maker of diesel engines, power generating systems and related products, decided to standardize its PC assets, it had to think about how to dispose of some 20,000 existing desktops and notebooks in 212 locations across 24 countries. Cummins Inc. partnered with IBM Global Financing to finance its new technology and remarket their old assets. Since security was a key concern, IBM provided a 3x data overwrite process to ensure that data stored on hard drives could no longer be accessed.

Financing For Projects Of All Sizes

Financing can help with the smallest of IT acquisitions yet also provides myriad benefits when launching and sustaining complex and long-term projects. What IBM Global Financing calls "project financing" helps companies align costs and yield benefits even as investments in a project are still being made.

Single-source, highly-customized financing across a project's entire lifecycle makes it easier for companies to manage both upfront investment and ongoing operating costs. Having the right financing structure in place increases the agility and accountability that executives require when embarking upon major business transformation initiatives.

When Marriott needed to make its Siebel CRM-based solution available to its multiple properties worldwide, it capitalized on IBM Global Financing flexible financing that matches costs with projected income. The structure allows Marriott to streamline budget approvals and smooth project costs over the multiple phases of the project.

Financing is no longer a piecemeal solution. More and more companies want to partner with their financier from the beginning and create a long-term partnership that offers a one-stop financing for hardware, software and services as well as asset management services.

For more information, please contact Brad Graham, Director of Complex Opportunities and Brand Management for IBM Global Financing at [email protected] or 972-561-6420.

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