For VARs, especially smaller ones, financing can be a sore spot – especially when it means they can’t bid on larger contracts, such as government and education gigs. These days, one of the only ways resellers can grow their business is through financing support, such as flexible leasing options at the point of sale.
Fortunately most distributors offer their own branded financing programs or manage leasing options from a range of tier-one vendors. Sometimes, though, they get burned. Remember back in 2006 when NexInnovations’ court documents revealed a $72 million debt – with more than $10 million of that owed to Tech Data? Those weren’t happy days for the Canadian arm of the broadline distributor.
But, despite the risks, it’s a necessary part of the business to provide their reseller customers with the purchasing power they need to stay competitive. Without these options, many resellers just wouldn’t be able to do as much business, which in the end hurts distributors.
The latest option for VARs is an agreement between Arrow and EMC (NASDAQ: EMC), where EMC will provide leasing services to resellers through EMC Global Financial Services. The two companies will provide contract and portfolio management support to EMC resellers for services such as preparing financing quotes on solution configurations.
The program is only available in the U.S. at this point, but it’s expected to roll out in Canada – and possibly globally – as it ramps up south of the border.
Arrow already offers leasing deals and other financial options to increase credit capacity for resellers, such as leasing programs from IBM and HP, as well as its own branded program. With this latest option, Arrow says it’s trying to help resellers understand how to sell the transaction through a financial vehicle and deliver a shorter sales cycle.
Typically the funding on a lease transaction cycles more quickly than a standard-term transaction. That means, in many cases, you can go from order to cash in a lease transaction within a 10-day cycle, whereas a regular transaction would typically take 30 days. Resellers also earn fees – or a percentage of the contract value – for product placement.
The other benefit is portfolio management, where the distributor helps resellers manage their customer contracts – so, when a contract comes to term, for example, distributors have a tool in place to make sure sales calls take place in a timely manner.
Arrow also rolled out the SMART (Services Maintenance and Renewal Tool), which helps resellers monitor their customer service agreements on HP solutions. Resellers can check for information on current services agreements over a secure Web site and identify contracts within 30, 60 and 90 days of expiring (and it’s available in Canada).