Microsoft Financing: When Customers Pay Later, They Buy More

"This year has been a year of validation for us as a business," said Brian Madison, general manager for Microsoft Financing, during a briefing at the company's annual worldwide partner conference in Boston. The Microsoft financing unit now boasts a portfolio of $500 million, Madison said, and its business doubled in fiscal year 2006.

Not only are customers making purchasing decisions sooner when presented with Microsoft Financing options, they are also committing to larger deal sizes, Madison said. In the case of VARs representing Dynamics AX (formerly known as Axapta) transaction sizes have expanded by 44 percent to 90 percent when financing was presented as part of the solution, he said. Moreover, the potential for discounting was weakened on the entire solution, since Microsoft's financing covers all aspects of the transaction including the software licenses, hardware and, more importantly, the services offered by the VAR.

Bryan Stuart, CFO and vice president of corporate development for Junction Solutions, a Microsoft Gold Certified Partner in Lincolnshire, Ill., echoed Madison's comments. During the past six months, Stuart said, at least half of his new client wins have been fueled by the availability of financing.

It also has helped solidify long-term relationships. "We have to make sure we're always in their ear, always in their business," Stuart said.

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In addition, incorporating financing for its customers has helped Junction Solutions improve its own cash flow, helping the solution provider invest in organic growth, he said.

Looking ahead, Madison said Microsoft Financing will work on programs to help solution providers encourage and drive early sales of the upcoming Vista and Office 2007 releases. "We're looking to use financing to help drive adoption," he said.

New financing programs introduced here at the partner conference include the Microsoft Financing 6/50 Promotion. Under the effort, which runs from July 1, 2006, to June 30, 2007, customers in the United States will pay $50 per month for the first six months of a contract, picking up the regular monthly payment in month 7 for the duration of the loan balance. In other countries, the promotion will be apply in the local currency.

The division also has introduced a number of tools for solution provider sales teams to make it simpler for them to include financing as part of proposals, including a payment calculator and online quote generator, both of which can be found on the partner portal.

Over coming weeks, Microsoft Financing also is expanding into France and Switzerland through an alliance with CIT Group from Switzerland. Through alliances such as the one with CIT, the division will be able to support financing in 20 of the top world markets by the end of 2008, Madison said.