Users wary of vendors bearing credit

Ever hungry for new business, vendors are again offering credit to fiscally constrained enterprises to snare customers who might otherwise find upfront costs too high to stomach.

With vendors such as Dell, HP and Cisco all offering a variety of credit terms for customers, IBM has upped the ante, spruiking a line of credit up to $150,000 for Australian SMEs. IBM claims the money will be approved and available within the hour - subject to approval, with terms and conditions. However, many users remain wary of the real price tag of vendor finance offerings and are prepared to look elsewhere for funds.

General manager of procurement portal Techbuy, Colin Mead, said credit that IBM and other vendors are offering is simply no different to any other financial or banking firms - other than vendors are more prepared to talk to SMEs.

However, Mead warns the initial attraction must be tempered with thorough contract checks before signing to prevent any unpleasant surprises.

"You have to be realistic. They have obviously done the research and found out how hard it is to fund both a small business and technology products. There is no such thing as a line of credit [without] offering something else - like whether they will use the funds to provide their own services," Mead said.

Traditional IT finance providers are also wary.

Suncorp strategic sourcing manager Jeffrey Westbrook said buyers must set a negotiation benchmark and a price and then balance the pros and cons of asset ownership compared to other purchasing options before considering vendor credit.

"Find out the rights to ownership at the end of the contract; this should be pre-agreed before you even enter the contract," Westbrook said. Intellectual property ownership of software in the agreement also needs to be checked, he added.

"[Check for] agreements on entry, operational lease and risk exposure in terms of data stored on the backend," Mead said.

Deloitte growth solutions lead partner, Tim Gullifer, said finance is being used as a promotional tool.

"IBM has a full suite of consultants in the SME space and has gone from being seen as a vendor and supplier to a non-IT-strategy consultant. It is now re-engineering its business as offering something for everyone. Consulting firms don't provide hardware and software - they do the implementation," Gullifer said.

IBM global financing general manager Frank Keenan described the $150,000 offer as a payment stream for services rather than an outright lease. "It is not a line of credit - it is a solution from an IBM business partner to selling a solution to the end user that would include hardware software and services."

The SME market is worth around $US300 million globally for IBM.

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