Microsoft to offer end user financing

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Microsoft to offer end user financing

Microsoft has partnered with finance program provider De Lage Landen to help it cut the cost of upfront software licensing costs.

Microsoft has partnered with finance program provider De Lage Landen to help it cut the cost of upfront software licensing costs.

The new financing program lets organisations to obtain finance for 100 per cent of a software project, or a combination of software, implementation services and hardware.

Repayments can be spread payments over a number of years under the program which has the potential to reduce up-front investment by more than 60 percent, Microsoft claimed.

It required no minimum hardware investment and has a minimum finance amount of $15,000 with an interest rate determined by the size of the loan.

Microsoft Financing project lead, Elizabeth Aris, claimed that traditional sources of financing were typically unwilling to finance software, forcing end users to turn face uncompetitive or inflexible terms with niche offerings.

She cited Forrester data from the US indicating that 25 percent of hardware is financed, while only three percent of software was financed.

“This is mainly due to most finance providers focusing on hard assets as security for the loan, such as hardware,” she said.

“Where they are financing “soft” assets, they tend to charge an interest premium, or limit the amount of software or services in a total loan, or only provide such finance to customers fitting very tight credit criteria.”

Despite the low cost and growing attractiveness of open source software, Aris said the new financing program was not specifically designed to combat the likes of Linux.

“Customers and partners tell us regularly that they have great aspirations for their IT but are constrained by budgets and other business issues,” she said.

“By offering financing [we] can address customer’s needs, and help customers to do more with their IT.”

Aris said the program would benefit reseller partners via enabling them to overcome customer budget constraints and increase the size of their sales.

“Evidence from the US shows that sales which are financed are between 15 and 40 percent larger than those which are not financed, and helps the partner to get paid faster – typically within 48 hours of approval,” she said.

“In addition, it helps partners to preserve their margin on their services in an IT project, where the customer wants to negotiate on the price of these services due to budget constraints.”

Citing IDC data, Aris said the spend on software and services in Australia was expected to be 65 percent of all IT spend in 2006, and thus new financing models were needed.
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