Service Charge: How Recurring Revenue Models Are Changing The Channel Financing Game


Despite all the upheaval in the financing market with the move to recurring revenue, IBM Global Financing's Ransdell said the shift is clearly an opportunity for both the market and the financing companies. In 2013 alone, IBM Global Financing gave out $15.8 billion in client financing volumes, including leases and loans.

The amount of lending isn't slowing, Ransdell said; it's just changing direction. Instead of being focused on financing resellers for end user data centers and hardware, they're financing cloud data centers and technologies for the service providers themselves.

"It's clearly an opportunity. I wouldn’t call it a threat -- I would just call it a shifting model," Ransdell  said. "Basically my customer may look different. My end-user customer that maybe I used to finance their data center, they look different because I might be financing their software and services instead of their hardware. I still have a lot of opportunity because that hardware infrastructure resides someplace."

The pace for financing requests overall isn't slowing down, Ingram Micro's Bay said, it's accelerating.

"Those financing options have to change, and we're talking about billions of dollars in any one month that we have extended as a company on a global basis. It's still a critical element that solution providers need distribution for, which is financing," Bay said. "We're close to them, so we know it, how their businesses are and the health of their businesses and the strategies that they're trying to drive towards. Being able to help subsidize and support them is important."

The bottom line, IDC's Middleton said, is that the financing market, just like the cloud and managed services industry itself, is in a state of transition. While it may be difficult, she said that doesn't mean that the change will be impossible.                                                                                                                                

"I don't think it's a hurdle that can't be overcome; you have to prepare for it and be ready for the change," Middleton said. "It took a few years but I think we're now at a good place where the market is really starting to build models around what customers need. Before, the customer wasn't even sure what they needed. It really went from two years ago -- now it's just really starting to pick up speed." 

PUBLISHED MARCH 25, 2014