Vendors get creative to keep deals flowing
With businesses around the world tightening their belts and focussing on conserving cash, IT spending looks set to take a major hit as a result of the COVID-19 pandemic.
HPE is among the vendors getting creative about how it can persuade customers to continue IT modernisation programmes, as cheque books slam shut.
It today announced a $2 billion package of finance measures, including an offer that allows buyers to defer the vast majority of payments to 2021.
Convert IT Infrastructure Into Capital
The company is also freshly touting an existing offering that lets customers “convert their IT infrastructure into new sources of capital” — effectively offering to buy out existing, owned IT assets in order to free up capital for new, upgraded technology.
HPE Financial Services has bought out $642 million worth of IT assets since it launched that programme, it said today, announcing the suite of finance options.
Buying out existing assets is an increasingly popular approach to winning deals for vendors like HPE, Hitachi Vantara and Dell, among others.
As Hitachi Vantara’s Neil Lewis explained on a recent call with Computer Business Review: “A customer with 50 assets providing a federated IT landscape where there was a business case to consolidate to bring about savings may be constrained by the fact there is two years depreciation remaining on the current assets.”
“There is clearly a case for change as the saving resulting from consolidation is 40+%, however the write down (in-year) of the existing assets would be unpalatable. Hitachi could buy back those assets for the customers NBV therefore removing the obstacle to change, deploy new consolidated systems and smooth transformation costs over the term of a new agreement delivering a saving from day #1 of the new term.”
HPE Finance Deal: “Time to Adapt”
HPE said the new $2 billion in financing will be applied to “help customers ensure business continuity and adapt in the current environment”.
A new “Payment Relief Program” will let customers buy the technology they need today and pay only 1 percent of the total contract value each month for the first eight months, deferring over 90 percent of the cost until 2021. (Beginning in 2021, each monthly payment would equal approximately 3.3 percent of total contract value.)
“This is a challenging time to lead a business. Today more than ever, IT leaders and CFOs play a central role in ensuring financial health while continuing operations”, said Irv Rothman, President and CEO of HPE Financial Services. “At HPE Financial Services, we are committed to helping businesses align their priorities from an IT economics perspective and provide them with concrete solutions so they can move forward.”
Many businesses today have an immediate need to preserve cash flow, defer or reduce expenses, and relieve capacity strains and delivery delays.
“IDC recommends that organizations focus on two immediate needs: Conserving capital and utilising flexible payment options like leasing or as-a-service to meet urgent capacity requirement with limited financial impact”, said Susan Middleton, IDC Research Director, Flexible Consumption and Financing Strategies for IT Infrastructure.
HPE is also launching a 90-day delayed payment structure to help “ease customers’ tight budgets”. This applies to new purchases of HPE hardware and select software, software appliances, services, and installation packages, the company said.