february 2010 kay stephenson financial client executive selling to the cfo
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IBM Global Financing
© 2010 IBM Corporation2
Agenda
Financial Markets & the Impact on I/T Selling
Financial Selling as part of the Total Solution
Addressing CFO Priorities
IBM Global Financing Toolkit for Business Partners
IBM Global Financing
© 2010 IBM Corporation3
Changes in the financial markets Sub-prime meltdown
$Ts global asset write-downs
Loss of liquidity, credit markets conserving cash
Bank/Financial institution failures and acquisitions
Increased corporate defaults especially speculative grades
Increasing default rates on multiple asset classes
Increased number of bankruptcies
Cutbacks in personal & corporate spending
Increased unemployment
Weakened US economy
IBM Global Financing
© 2010 IBM Corporation4
Impact to our clients
Stock market turmoil
Economic uncertainty
Tightening credit markets
Access to capital shrinking Less credit available in the
market, and more restrictions
Costs of external capital rising
Credit lines needed to support core business needs
Pressure on spending CFO involved in decision-making
Near-term investments must have strong business case
What has not changed:
The future success of any client is still dependent on their ability to invest in meeting their customers’ needs and improving their competitive position
IBM Global Financing
© 2010 IBM Corporation5
What does this mean to I/T sellers? Understand health of client’s business
– Annual reports, analyst reports, company website
– Utilize online tools (i.e. Yahoo! Finance, Google Finance, www.cfo.com)
– Not every client is creditworthy
Understand industry dynamics and their position in industry
Validate opportunity with finance team/CFO in addition to the sponsor/line of business exec, know current approval process
Incorporate financial justification (business case) in proposals
– Focus on payback and timing of ROI
– Translate I/T costs into business value
– Helps your sponsor sell internally
Financial Selling is key to providing theTOTAL SOLUTION Selling
– Positions you as a trusted business advisor
IBM Global Financing
© 2010 IBM Corporation6
Financial Selling 101
Helps YOU align I/T costs with BUSINESS VALUE
Allows YOU to discuss the true TOTAL COST of OWNERSHIP of the solution
Enables YOU to overcome client objections and CLOSE THE DEAL
Elevates YOU up the client decision chain
Understand client requirements and funding sources
Engage IGF early
Create a VISION for the potential VALUE
Make TCO the client’s evaluation criteria
Enhance the
Include a monthly payment option in all your proposals
Using financial values, metrics & approaches as a part of the sales process
Relating financial metrics to the client’s business objectives to support your solution
Demonstrating to the client that you understand their business
What is Financial Selling?
How Financial Selling Changes the Game
Leading with a Financial Selling Approach
IBM Global Financing
© 2010 IBM Corporation7
Addressing the CFO’s priorities
Cash Flow Improvements
– Preserve cash
– Reduce spending
Risk Avoidance
– Operational
– Investment
Short-term returns
– Shorter payback periods
– Realize ROI < 12 months
IBM Global Financing
© 2010 IBM Corporation8
Cash Flow: Preserve Cash
Every source of cash has a cost
– Bond placements (underwriting costs, settlement fees)
– Stock placements (EPS dilution)
– Bank facilities/lines of credit (origination fees, indexed rates, covenants)
– Retained earnings (opportunity cost – business growth)
In the current economic environment,
do not assume that your client still wants to pay cash.
In the current economic environment,
do not assume that your client still wants to pay cash.
IBM Global Financing
© 2010 IBM Corporation9
Cash Flow: Preserve Cash
Large Upfront Expenditure Affordable monthly payments
Most clients are interested in….–Additional source of credit that does not impact current credit lines
–Access to low-cost funds, even if they are not interested in leasing
–Better terms and greater flexibility than current bank facilities
IBM Global Financing offers credit qualified clients an alternative source of cash at competitive rates,
often below market, with flexible terms
IBM Global Financing offers credit qualified clients an alternative source of cash at competitive rates,
often below market, with flexible terms
IBM Global Financing
© 2010 IBM Corporation10
Cash Flow: Reduce Spending
Facilitates cost-effective technology upgrades
– Mid-lease or End of Lease
– Holds or reduces monthly payment
– Reduce potential for book losses
– Gives I/T Management more control over technology upgrades & refreshes
$271,774
$225,634
$0
$50K
$100K
$150K
$200K
$250K
$300K
POWER6 570 Purchase
POWER6 570 Lease
17% savings over purchase
FMV leasing lowers total cost of ownership
– Reduces upfront cash investment
– Lowest monthly payments
– Pay for portion of asset used (IGF takes residual value position)
– IGF assumes costs of disposal
New monthly payment is 5%
lower than original lease
payment
Est
. mon
thly
pay
men
t ($)
Lease Term (Months)
Initial 36mo Lease
12 4836
POWER5+ 570
$6,079 / month*
24 60
Technology Upgrade
New Base Lease
36mo
POWER6 570 MES Upgrade
$6,378 / month*
Based on 36 month FMV lease at Best Credit ratesBased on 36 month FMV lease at Best Credit rates
IBM Global Financing
© 2010 IBM Corporation11
FMV Leasing can lower IT acquisition costs by 10-20%
over outright purchase – Optimize price performance
improvements
– Residual value position by lessor
– Transfer risk of obsolescence to lessor
– Transfer cost for Disposal of Asset
– Avoid higher maintenance costs on older equipment
Cash Flow: Reduce Spending Focus on Total Cost of Ownership
Acquisition CostAcquisition Cost
SecuritySecurity
DeploymentDeployment
DowntimeDowntime
Asset ManagementAsset Management
SoftwareSoftware
MaintenanceMaintenance
PowerPowerSpaceSpace
10%-50%
50%-90%
Consider price performance & total operating costs
TCO Review usually favors a shorter refresh cycle
IBM Global Financing
© 2010 IBM Corporation12
Risk Avoidance: Operational Risk
Leasing/financing helps client to: – More closely align the costs to the expected benefit
– Improve short-term return on investment
– Accelerate break-even/payback on a project
Project Costs
Project Benefits
Financed
Payments
Use of deferralcan furtherreduce risk
IBM Global Financing
© 2010 IBM Corporation13
Risk Avoidance: Investment Risk
FMV Leasing transfersrisk of obsolescence
– Rapidly changing technologydriving shorter cycles
– Asset value drops ~50-75%in first year of ownership
– Potential for book losses
FMV leasing transfers risk of proper disposal
– Growing legislation surrounding environmental issues and data destruction
– IBM Global Financing has experience and expertise to ensure compliance with all environmental legislation
0%
20%
40%
60%
80%
100%
0 1 2 3 4 5
Book Value
Asset Value
IBM Global Financing
© 2010 IBM Corporation14
Return on Investment – Break Even Analysis
Typical ROI for a Purchase SW Acquisition
-80000
-60000
-40000
-20000
0
20000
40000
60000
80000
1q 2q 3q 4q 1q 2q 3q 4q 1q 2q 3q 4q
Net Cost
Net Benefit
Result
Typical ROI for a Financed SW Acquisition
-80000
-60000
-40000
-20000
0
20000
40000
60000
80000
1q 2q 3q 4q 1q 2q 3q 4q 1q 2q 3q 4q
Net Cost
Net Benefit
Result
ROI analysis compares the costs to the strategic value of the I/T initiative
CFO analytics for comparing the relative value of projects competing for funding
– Payback/Break-Even (BE)
– Net Present Value (NPV)
– Internal Rate of Return (IRR)
Contact your FSE or Channel Rep for assistance on ROI calculations
IBM Global Financing
© 2010 IBM Corporation15
Return on Investment – NPV analysis
Low Rate Financing and FMV leasing enhances the NPV of a project
Description Purchase Price TermMonthly Payment
Total of Payments
PV of PaymentsPV as % of
Purchase Price
Server $300,000.00 36 $7,830.00 $281,880.00 $248,075.20 82.7%Software $50,000.00 36 $1,481.50 $53,334.00 $46,937.86 93.9%Installation Services $10,000.00 36 $315.60 $11,361.60 $9,999.05 100.0%
TOTAL $360,000.00 $9,627.10 $346,575.60 $305,012.10 84.7%
This represents a savings of 15.3% over Cash Purchase !!
Assumes FMV lease at Best Credit Rates on hardware, with IBM Global Financing low rate financing on hardware and softwareCustomer incremental borrowing costs estimated at 9%
IBM Global Financing
© 2010 IBM Corporation16
Return on Investment ROI analysis compares the costs to the strategic value of the I/T initiative
– Net Present Value (NPV)
– Internal Rate of Return (IRR)
– Payback/Break-Even (BE)
Allows client CFO to compare the relative value of projects competing for use of available funds
ROI
$ $ $
Years Years Years
Maintenance
Services
Phase I
Phase II
Phase III
Year 1
Year 1
Year 1
Year 2
Year 3
ROI
Major cost / returnmismatch
Improved cost / return alignment
Year 1 Year 2 Year 3
Phases I - III
ROI
Costs more closely aligned
to expected returns
BAU Term Financing example IBM Project FinancingTM example
Year 1 Year 2Year 3
Hardware
IBM Global Financing
© 2010 IBM Corporation17
Increase your odds of winning with IBM Global Financing!
WinLose
Odds of winning increase 36% for partner sellerswhen IBM Global Financing is involved
IBM’s Odds of Winning
IGFIGF
125% higher odds with IGF working with small
clients (<1000 employees)
37% higher odds with IGF for Power Sys
deals, 36% for Storage deals
88% higher odds with IGF for deals that have
very long sell cycles
2008 IBM Market Intelligence study of STG opportunities found thatIGF involvement causes an increase in IBM’s odds of winning
36% higher odds with IGF for opportunities over $100K owned by
BPs
IBM Global Financing
© 2010 IBM Corporation18
Smarter Financing Toolkit
Low Rate Financing on IBM Hardware & Services
As Low as 0% Software Financing
Deferral Programs
IBM Certified Pre-Owned Equipment
IBM Global Financing
© 2010 IBM Corporation19
Low Rate Financing for IBM Hardware & Services
Below market rates offered to credit qualified clients on IBM products
Financing rates as low as 2.20% in the United States or 0.50% in Canada for eligible hardware
As low as 2.80% in the United States or 2.60% in Canada on eligible Global Business Services
Minimum transaction sizes as low as $5,000
Almost every IBM brand qualifies, from powerful IBM systems and storage to IBM services
IBM Global Financing
© 2010 IBM Corporation20
As Low as 0% Software Financing
Zero percent financing offer for multi-year licensing deals of Lotus Software
IGF Low Rate Software Financing on all IBM SW deals less than $1.5M provides qualified clients with an attractive financing alternative
One Year Two YearInvestment Grade
Quarterly payment 50,000$ 25,708$ Total payments 200,000$ 205,664$ Implicit Interest Rate 0.00% 3.22%
Non-Investment GradeQuarterly payment 50,350$ 26,404$ Total payments 201,400$ 211,232$ Implicit Interest Rate 1.87% 6.37%
Assumptions:Purchase Price = $200,000Quarterly Payments in AdvanceFirst of the month billing optionBased on 4Q acceptanceRates will vary based on customer credit rating
Ask your IGF Channel Rep about the Software Cheat Sheet!
IBM Global Financing
© 2010 IBM Corporation21
Deferral Programs
Payment deferrals up to 90 days for Qualified clients
– IBM Hardware, including IBM Certified Pre-Owned Equipment
– IBM Software and Services
– Fair Market Value and Full Payout leases/loans
– 1-3 month no payments, followed by 36 monthly payments
“No charge” 6 month deferral on select Power systems
– Fair Market Value only
– 7037, 7047, 9111, 9116, 9131 and 9133 only
– 36 monthly payments following deferral
– $25K - $1M deal size
Subject to credit approval
IBM Global Financing
© 2010 IBM Corporation22
IBM Certified Pre-owned Equipment
Fully refurbished and tested to IBM standards
IBM maintenance qualified
90-day quality satisfaction guarantee
– With IBM maintenance contract
Wide range of equipment available
– Off the shelf or custom-configured
Systems and features at a fraction of the original price
Less stringent credit requirements for purchase or financing
The Future is Green with IBM
IBM Global Financing
© 2010 IBM Corporation23
Reseller Financing
Inventory Financing
Accounts Receivable Financing
Large Sale Financing
Asset Based Loans
Revolving Credit Lines
45 days free on x Series Products
IBM Global Financing
© 2010 IBM Corporation24
Reseller Benefits
»Increased Credit Capacity
»45 Days free financing on x-Series (paid by IBM)
»100% Advance Rates
»Online Account Management
»Ease of business – credit line available for all suppliers
»Flexible Structures – match repayment terms to Accounts Receivable turns
IBM Global FinancingReseller
Distributor
2. Ships Product
1. Issues PO
4. Pays Invoice
5. Invoices Reseller
6. Pays Invoice
3. InvoicesIBM
Inventory Financing with IBM Global Financing
IBM Global Financing
© 2010 IBM Corporation25
IGF Top Value Propositions in Today’s Economy
Provides alternative source of cash/capital/funding
Provides lower costs of hardware acquisition
Reduces client operational, investment & supplier risks
Improves short-term return on I/T investments
Accelerates the implementation of technology
IBM Global Financing
© 2010 IBM Corporation27
Links to more information
IBM Global Financing Offerings
IBM Global Financing Speed Sheet
Financial Selling Education Modules
Planning Rate On-line Calculator
Rapid Online Financing Tool
Winning with Financing Flipbook
C-Suite Selling with IGF Just Got Simpler
Analyst Reports, White Papers & Case Studies
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