As the worldwide recession continues to squeeze manufacturers — and in some cases slow their technology spending — enterprise software providers have begun to roll out low- or no-cost financing deals meant to entice customers to open their purse strings.
But not all companies can expect to benefit from the low-cost financing deals, experts warn. That’s because, in many cases, enterprise software customers will need impeccable credit histories to qualify.
Among technology vendors offering limited-time, lower-cost financing deals are SAP, Microsoft, Infor, Dell Inc., and Hewlett-Packard Co. Recently, for example, Microsoft began offering 0% financing to first-time buyers of its enterprise applications, including Dynamics AX, GP, SL, and CRM. Microsoft said the deal, offered through financing partners, is available through March 20, 2009, on software and first-year enhancement purchases ranging from $20,000 to $1 million. Microsoft’s 0% financing deals cover a period of up to 36 months.
Throughout the fourth quarter of 2008, SAP has offered 0% financing to its customers as part what the company called its Best-Run Now initiative. The deal, also made available through finance partners, offered 0% financing to buyers of SAP software and services over a 12-month period. SAP also incented reseller partners to offer low-cost financing options, said Jeff Stiles, senior vice president for SAP’s small and medium enterprise marketing.
Similar low-cost financing deals are available from computer hardware manufacturers Dell and HP. In the 2008 fourth quarter, Dell has offered 0% financing to large business and institutional customers for periods ranging from 12 months to 48 months. And, this month, HP announced 0% financing on its business technology optimization software, which is typically bought and used by IT departments.
Some vendors are offering low-cost financing deals but not heavily promoting the fact. Infor, for example, is working with its partner, IBM Global Finance, to put together low-interest financing deals for customers that buy Infor’s enterprise software running on IBM’s iSeries hardware. The comprehensive deals, offered on a case-by-case basis, cover software, hardware, consulting, and implementation. Infor’s effort has involved pre-qualifying customers and training its sales force in the flexible financing options, said Dennis Michalis, senior vice president for global partners.
There’s no mystery what’s behind these offers, vendors and analysts said: Software vendors want to combat slowing business technology purchases by offering low-cost credit to select customers. As the recession has tightened, corporate spending on information technology has waned. Recently, in the wake of the financial crisis, IDC reduced its estimate of 2009 corporate IT spending growth to 2.6% from 5.9%.
“We wanted to help customers with their liquidity by offering credit options,” SAP’s Stiles said. “We did it also to help solidify our business and help our channel partners.”
In effect, analysts say, vendors are stepping in as financing from traditional sources such as banks has dried up. “It’s sad, but the vendors are doing what the banks should be doing,” said Ray Wang, research vice president at Forrester Research.
As the recession drags on, manufacturers can expect to see more low-cost financing deals from software and hardware vendors, analysts said. Microsoft will decide in March whether to extend its 0% financing offer, said Gayle Hoshino, general manager for Dynamics pricing and services. And Infor is beginning to ramp up a similar deal for discrete manufacturing buyers of its ERP LN product, Michalis said.