IBM Global Financing Eyeing Growth in 2002

Joseph Lane, senior vice president and group executive for IBM Global Financing, spoke to VARBusiness this week during IBM's PartnerWorld 2002 event in San Francisco about how the current economic environment is forcing companies to take a more practical view of their IT spending and look for ways to cut costs while still producing results.

"This plays strongly into a company that has financing capabilities embedded in their overall solutions," says Lane.

The financing organization judges its performance on the percentage of IBM revenue that it handles, he says. While the Global Financing unit handled 30 percent of all IBM hardware sold in 2000, the organization increased that significantly in 2001, to 35 percent of the total hardware sales. In dollar amounts that translates to $42 billion in revenue that came through IBM Global Financing, with $30 billion of that amount coming through business partners.

"When we increase the amount of IBM products and services we finance, it's better for us and it's better for our partners because financing allows for flexibility," he says.

Lane says the biggest concern he has heard from IBM business partners and clients lately is access to capital, which has tightened significantly as a result of economic conditions. "Only the highly rated, low-risk companies get access to low rates," he says. "As you move out the spectrum, those smaller companies have to pay more spread to get the money."

By working closely with a highly rated company like IBM, partners and clients can take advantage of the best rates and programs. In addition, he says IBM Global Financing can help companies assess credit risks associated with financing options, since it has a comprehensive automated credit-scoring model based on the records it has on more than 25,000 clients.

Despite the value-add, Lane says it's still a challenge marketing IBM Global Financing's services to potential clients and partners, since in many cases, especially with smaller clients, there is a tendency to avoid getting a company's CFO involved in a deal. "But the best way to capture value through financing is to get with the CFO early."

Aside from hardware financing, IBM Global Financing has been making a big play of late in the services side of the business, with programs around strategic outsourcing, e-sourcing and other services. "Still, business integration remains a challenge for us in trying to figure out a better financing offering," says Lane.

Leasing also continues to be a strong area of growth, with 95 of the Fortune 100 currently leasing some part of their IT infrastructure through IBM. And for the mid-market, the company recently implemented a technology upgrade option, available through business partners, around the zSeries 800 server. The program is targeted to companies that want to upgrade their server with low upfront costs.

Another big portion of IBM Global Financing's business comes in the form of global asset recovery. In fact, Lane says that part of the business brings in 15,000 units per week, most of which are recycled and resold or leased for reduced prices.