Alternate Financing the Path Ahead

Scott Griggs, senior marketing manager and head, partner marketing, Cisco Capital APJC talks about the company's financing arm, the Indian capital market and its relevance to partners

Cisco's financing arm - Cisco Capital, has been actively backing projects for its customers since a long time and given the changing market dynamics. The company intends that channel partners offer financing as an option particularly in cases where the partners are pitching for large projects, as the company believes that this will help partners to win customers faster.
In a market environment, dependent on credit facilities for business growth, it's obvious that these options are increasingly considered at a relatively early stage in the technology analysis process. This would also stand to be a differentiating factor in bagging deals, which would eventually drive the organization forward. There are financial institution-backed funding options available to customers, funding through a vendor financing arm would work out cheaper in most cases. Griggs said, "We have an great understanding with regards to the risks involved in IT projects. So, we can cover risks better and offer better financing options."

Need for Vendor Financing
Cisco Capital has over $9 billion cash and assets that are open to financing. The company is in process of educating its channel fraternity across the country to enable them to offer financing options to its customers. Scott Griggs, Senior Marketing Manager & Head, Partner Marketing, Cisco Capital-APJC said, "We have rolled processes and activities to educate partners about various solutions available and how to avail them. We will be providing them with training, collaterals and tools to qualify leads."

Cisco earlier last year had done a survey along with Forrester, which had identified insights in to the technology acquisition strategies of businesses and major technology transitions expected to drive growth in the uptake of vendor financing. This study was conducted among large SMBs and enterprises in markets such as India, China and Australia to understand the mindsets of customers.

Here are a few India specific findings from the report:
A majority, about 71% of all India organizations agreed that the ability of a vendor who can provide financing for their products & services was a factor in the technology purchase decision process

Over 50% of organizations polled in India evaluated funding options at or before the quoting stage of the purchase decision-making process

In India, the CFO was the dominant decision maker across MNCs and mid-sized organizations

Griggs said, "Close 30% of Indian enterprises are planning to seek external funding for their technology investments, and that nearly 60 percent of them would want to work with a channel partner on funding options." He further added, "About 70% of customers would like financing options for procuring server, storage and networking hardware. While, more enterprise customers are considering borrowing money for setting up data centers, smaller enterprises are looking at funding for communication projects."

Griggs pointed out that the study also found that 78 percent of companies would consider financing options at or before the proposal stage. In this, IT-ITeS and manufacturing are the two sectors most likely to seek external funding.

Relevance to partners
Griggs said, "Given that the majority of companies look for a reduction in capex investment, it is now possible for them to adopt the latest solutions which not only help them boost productivity, but also help level the playing field in the industry."
From a partner perspective, it will bring in an added potential to boost sales, and foster long lasting relationships with their customers. "The role of the channel partner has evolved dramatically and they are major influencers when it comes to helping customers with their technological requirements but also make intelligent recommendations about growing their business holistically - and advise on the variety of finance options which can be considered," said Griggs.

In a Nutshell
Vendor financing is an area that has the potential to transform the way that companies budget for their technology - especially when these budgets are being allocated with a business mind-set, as compared to just an IT related purchase. In this day and age, where pay as you go models are being lapped up by organizations large and small, financing options like these transform the way the industry functions.

Cisco Capital funds projects where at least 70%of the project cost would be accounted for by Cisco equipment. The rest of the cost can be complementary products or even services, but not from direct competitors of Cisco. Also, respondents of the survey said they were most concerned with the need to reduce costs and increase profit margin, and also indicated that it is easier to source capital from vendor financiers compared to six months ago.