An Industry Note: Financing Options from Information Technology Vendors: Addressing the Needs of the Small and Medium Business Market

Executive Summary

Small and medium businesses (SMBs) play a major role in economic activity in the world. In the ever-changing technology landscape, one of the many challenges that small and medium businesses (SMBs) world over encountered was access to funds to procure technology that would enable business growth, productivity, and profitability. In the past, SMBs and entrepreneurs had looked to traditional financial institutions for additional funds. However, the arrival of technology providers as lenders altered the scenario, opening up new vistas for a convenient and flexible mode of credit, specifically for technology acquisition. Global leaders in information and communication technologies (ICT) such as IBM Inc1, Cisco Systems2, Dell 3, Hewlett Packard4, and Microsoft5 besides a host of mid-sized players such as Nortel6, Lenovo7, Avaya8, and Alcatel-Lucent9 offered customizable financial solutions.

The credit covered hardware, software, training, and maintenance. Some organizations such as IBM Global Finance also offered project finance encompassing the customer's business transformation processes. Through no-interest lease options and low-interest flexible financing schemes, technology vendors entered into short- and long-term relationships with SMBs, giving them the freedom to invest in business expansion activities rather than worry about IT spends.

Keywords:

Small and Medium Businesses (SMBs), Information and Communication Technologies (ICT), Customizable financial solutions, Technology acquisition, Legacy equipment, Technology obsolescence, Leasing, Finance lease, Operating lease, Sale and leaseback, Resellers, Channel partners, IBM Global Financing, Cisco Systems Capital, Dell, Microsoft, Hewlett Packard (HP), Enterprise Resource Planning (ERP), Supply Chain Management (SCM), Customer Relationship Management (CRM), Unified Communications, Internet Protocol (IP) telephony, Virtual Private Networks (VPNs), Intranet, Business growth, Operational efficiency, Investment protection, Remote connectivity, Small and Medium Enterprises (SMEs)

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1] IBM is a leading information technology solutions provider in the world with total revenues of US$ 103.6 billion in 2008.
2] Based in San Jose, California, Cisco Systems is one of the world's leading communication technology solutions providers. As of 2008, it had operations spread across 150 countries and revenues of US$ 39.5 billion.
3] Dell Inc, Texas manufactures computers, networking and storage devices, and computer components. It had operations worldwide and posted revenues of US$ 61.13 billion in 2008.
4] A multifaceted company offering a range of computing, imaging and printing solutions, Hewlett Packard is based in US and has offices across the globe. For fiscal 2008, it reported revenues of US$ 118.4 billion.
5] Microsoft Corporation, based in Washington, USA, is the world's leading provider of software and operating systems. With offices across 105 countries, the company reported revenues of US$ 60.42 billion as of 2008.
6] Nortel is a leading provider of communication equipment and network technology solutions. As of August 2009, the company did business in about 150 countries.
7] The Lenovo Group, headquartered at Hong Kong, is a leading manufacturer of personal computers, notebooks, servers, and other computer peripherals. The company recorded revenues of US$ 16.4 billion for the financial year 2008.
8] AVAYA Inc. is a private company based in the US. In the communications marketplace, it offered a host of solutions such as Internet Protocol telephony, routers, switches, etc. for businesses.
9] Alcatel-Lucent, based in Paris, is one of the leading providers of communication technology solutions. In 2008, it earned revenues amounting to Euro 16.98 billion and had offices in over 130 countries.