More or Lease: Tech Data, IBM Offer Financing Alternative

The two companies have had a flooring relationship for several years and just extended the relationship to include leasing. To spur more leasing activity, IGF plans to offer a 3 point incentive to solution providers on leased PC solutions and 2 percent on server solutions through the end of the year. Regularly, VARs receive 1 percent, said Joni Tooliatos, business unit executive of channel financing for IBM Credit.

In addition, Clearwater, Fla.-based Tech Data plans to calculate and include a monthly lease payment on all quotes, so solution providers can show end users what their cost would be. Initially the leasing figure is available only on IBM-centric orders, but it will be included on all quotes within 30 days, said Scott Tillesen, director of credit-SMB accounts at Tech Data, during the distributor's TechSelect conference in Chicago last Friday.

Leasing should be a more popular financing option than it is, Tillesen said, and he hopes the IGF program will make a difference.

"We're making sure our resellers are made aware of these programs. Hopefully it will sink in over time," he said. "It's a continuous education process. No one has found a way to hit a home run to promote leasing. The game is won by bunts and singles. We're competing with education time that resellers need to spend on many other things like new technologies. This is one more thing for them to learn, but I don't know of anything that can improve their profitability quicker with little investment of time and no investment of money than leasing to end users."

The IGF leasing program also has a simple application process that requires little more than the legal name and address of the end user, said Kevin Maisch, a financial client executive at IGF. Applications are typically approved within an hour, he added.

"On the surface, you'd think there was more risk [with that simple an application]. But our statistics so far are we're able to evaluate and approve a large portion of the leads coming to us," Maisch said. "All we need is the legal name and address of the client and a summary of the solution. We felt we needed to do that. The contract itself is two pages."

Sam Ruggeri, president of Advanced Vision Technology Group, a solution provider in Hauppauge, N.Y., could be the kind of customer Tech Data wants to attract with the IGF leasing program. Advanced Vision Technology Group does not regularly offer leasing solutions now.

"If there's a compelling reason and the math works out, we would look at it, sure," Ruggeri said. "I've seen some cases where the residual value works out so that leasing makes sense, but I don't know if that's the case for everyone. It depends on the client, it depends on the market you're in."

IGF is able to offer lower leasing rates than most competitors because a sister IBM business, Global Asset Recovery Services, specializes in the return and sale of end-of-lease IT equipment. For example, Maisch says, the end user's final cost for the lease can be less than the up-front purchase price. Other leasing companies can't do that, he said.

"That provides a compelling reason for the reseller for trying to change behavior of these folks. Because of our refurbishing capabilities, we can take aggressive residual values," Maisch said.

IBM sold $1.6 billion in used equipment last year, Tooliatos said. "That's a huge market for us. That business enables us to provide a higher return on value, better rates than other leasing companies."

In many cases, IGF should even be a cheaper alternative than a leasing company that the end user already uses, Tillesen said.

"No one is competitive to IBM because of the residual value controls they have," Tillesen said. "We'd like to see more resellers put more lease quotes on early on with their bids. Here's a way to conserve cash flow and capital. [End users] might have thought they have to spend $20,000 up front. Now they can spend spend $1,000 a month. Now they have a compelling argument."