Maryann Von Seggern, director of the worldwide channel development group at Cisco capital, told CDN at the recent Cisco Channel Exchange conference that North America has a banking problem.
Von Seggern has been crisscrossing the U.S. talking to CFOs about Cisco Capital as an option for financing deals and to help customers acquire technology. In her estimation CFOs have watched what has occurred on Wall Street and done virtually nothing.
“They’re at pause and we’re reminding them that customer liquidity in the market has dried up. Cisco Capital leverages Cisco’s balance sheet and can provide sources of finance,” she said.
Von Seggern has also been watching what’s been happening with on Wall Street and with the bailout of the baking industry, and not just for the past few months. She said people have forgotten that the banks reduced lending starting in the spring of 2007 because of sub-prime lending scandal.
“When the first one of those losses hit the banks, they started changing their behaviour and raised their spread for the losses. We have a banking problem and you can’t recover (the sub-prime losses),” Von Seggern said.
Banks have either stopped lending or changed the requirements for lending. As Von Seggern puts it they’re “putting hair cuts to loans.”
If there’s a silver lining, it’s that from Cisco’s own sources major deals involving their products have not be cancelled, but some have been delayed. Compounding the problem is the banks unwillingness to start lending in a major way. “The U.S. government has given them billions so start lending again,” she said.
Von Seggern has a hunch that the banks will start to loosen up in the next calendar year.
For Cisco Capital, there’s a business even in this economic crisis, and Von Seggern expects a 10 per cent increase in business. Customers are looking for alternative sources of capital and using Cisco rather than a bank.
Analyst firm the Yankee Group has reported that when financing is brought into a transaction that deal becomes 34 per cent bigger on average. It’s in the best interests of Cisco to lend channel partners and customers money. “Cisco makes great margins off its products and we want to keep that product churning,” Von Seggern said.
Cisco Capital’s model works with channel partners’ payment turns in either 60 or 90 day periods. Last year, Cisco Capital supplied more than US$4.5 billion in financing. This arm also works as a remarketing engine for all of Cisco’s trade-in equipment.
Von Seggern said Cisco Capital is ramping up for this potential increase. That means more offerings through distribution, special promotions, zero per cent financing offers and in product areas for the SMB, data center and unified communications.
They are in 140 countries and they work with five global banks.