Credit crunch has financial saviours

Resellers need solid financial underpinnings in this more competitive market, says Philip White

Philip White: Finance offers a way to achieve the return on investment resellers look for.

Recent comment on the need for resellers to become trusted advisors raises some interesting issues for those working in the IT channel. The procurement balance has shifted and resellers increasingly face demand for solutions that offer a positive impact on the bottom line.

But evolving the channel business model to make such a shift possible can leave resellers out of pocket, unless they have a finance partner from the start.

With business investments under such close scrutiny, IT needs to demonstrate how it will make positive improvements to profit margins, deliver business benefits and make significant productivity gains.

What is clear from our experience working with resellers across the UK is that they know this, and have begun finding ways to adapt their sales techniques and processes to deliver personalised, relevant services and products.

We are seeing a marked shift away from the more traditional solution provider model towards the trusted advisor role, as resellers work hard to adapt to meet the changing needs of their customers.
Hand in hand with this approach is the need to create different product offerings such as software-as-a-service (SaaS) or software-plus-service. And here is where finance can play an invaluable role.

Paying over time is the feature that makes all these emerging product offerings attractive to customers, and there is only so much resellers can do to deliver these kinds of services without finance as a core.

It is unrealistic to expect resellers to move away from the traditional, more conventional, cash-driven sales models they have relied on until now, towards the must-have services their customers demand, without finding a way to manage the inevitable negative impact on cashflow. Finance offers a way to achieve the demonstrable return on investment that resellers are looking for as well as minimise impact on cashflow.

As CRN went to press, it was becoming apparent that more businesses are feeling the effect of the credit crunch. Yet the response so far has been one of astute financial planning, rather than a wholesale cutback of investment and growth.
A recent survey by Baker Tilly shows that 60 per cent of companies are suffering from shrinking profits while 23 per cent are
having trouble borrowing. It also revealed that 75 per cent of businesses are pursuing growth strategies over the next year.

All is not lost
Instead of cutting back, companies are looking closer at credit control, financial forecasting, effective working capital
management and technology investment.

Finance directors are assessing the effect of the credit crunch and adapting strategies accordingly.

Latest figures from the Finance and Leasing Association (FLA) are, like the Baker Tilly report, indicative of businesses’ strategic response to the economic climate. The FLA found that businesses are still investing in commercial vehicles, plant and machinery and IT equipment. Finance provided to fund such investment grew in June by five, 64, and 13 per cent respectively. New business written by FLA members for IT equipment was £267m in June and £1,637m for the year ­ up
12 per cent on a year ago.

There is a robust market for IT among UK businesses, with technology viewed as an enabler of growth, and finance is playing an important role. Businesses are adapting their strategies to focus more on financial forecasting, credit control and effective working capital management ­ pointing towards a greater use of finance around IT investment. In fact, the credit crunch is strengthening the trend towards businesses looking to pay for IT over time, plan ahead, manage risk and maintain cashflow.

But can resellers afford to play? Upfront payments to monthly installments can be too much for many in the channel. Yet more resellers see finance as delivering customer service and financial stability. By offering customers the exact hardware,
software and services they want and financing it appropriately, resellers can stave off the effects of the credit crunch.

The vital element in all this is that although resellers have to adapt to meet their customers’ needs, they still need to concentrate on their core skills as IT experts. The right finance partner enables them to do that.

Philip White is chief executive of Syscap