Credit crunch prevents resellers from helping customers financially

New IDC report confirms that both resellers and customers are losing out due to the squeeze on funds

Joshi: The UK channel too needs to pay more attention to financing possibilities.

A US poll by IDC has confirmed that the credit crunch is not only damaging customer spend but resellers’ ability to meet customer requirements.

The market analysis firm in February surveyed 43 channel partners that turn over $1m (£686,000) to $50m (£34m) annually. The sample resellers averaged 1,000 employees each.

Joseph Pucciarelli, US programme director of technology financing and management strategies at IDC, said the responses confirmed that customers need more help with IT financing while channel partners are finding themselves less able to provide that assistance.

“The captive financing units for the major IT vendors have worked for many years to develop and deliver financing solutions to their solution providers. These latest research findings suggest significant gaps remain,” Pucciarelli said.

Access to financial capital and credit are the second most important resources for resellers after human capital, he added.

“Therefore, understanding the real-time risks and opportunities confronting this critical segment of the IT solution chain will be an important bellwether for the entire IT industry,” Pucciarelli said.

Some 64 per cent of large channel providers polled said their customers are more interested in IT financing and leasing programmes than they were six months ago.

Yet 40 per cent of these same resellers said they do not anticipate a need to educate their customers on the benefits of leasing and financing.

Eleven per cent of respondents reported that they do not have access to “business-as-usual” capital. About 20 per cent of those with annual revenues less than $5m claimed they couldn’t get the capital they needed.

Nearly half said they are having more trouble getting customers financed, rising to 73 per cent among the smaller resellers.

Janet Waxman, US vice president of infrastructure channels and alliances at IDC, said that some vendors have “tended to focus disproportionately” on larger resellers when times are tough.

However, she added that the poll had also found that small players with revenues of less than $5m a year had higher economic expectations for 2009 despite experiencing more difficulties with capital.

Nitin Joshi, founder of business advisory service Channelmoney, said that the UK channel is having real problems with third-party finance currently.

“It’s worrying that 40 per cent [in the US poll] appeared not to feel the need to promote [third-party finance options] far and wide. The vendor finance programs tend to focus on the large resellers, which is a mistake, and the bank finance companies lack sector focus,” Joshi said.

“With corporates under so much cash pressure, leasing offers a great alternative route – if only this was recognised by channel players.”

Peter Austin, general manager for flow business at Siemens Financial Services, said the IDC poll results resembled what one might expect to find happening in the UK channel.

"It is the kind of thing that people have been saying for a long time," he said. "Opportunities are out there but are harder and taking longer to come to fruition. You have got to work twice as hard to get the same results you did a year ago."

He noted that the sample size of 43 is also quite small. However, customer experiences are being assessed and the 43 resellers have on average 1,000 customers each.

UK resellers too needed to consider their options for financing more proactively, with leasing schemes, for example, having more to offer when times are tough, Austin said.