Daily News: April 22, 2014

GE Capital: IT Financing Must Adapt to Cloud Computing

Companies that design information technology solutions for commercial customers are facing significant changes to their business model as they adapt to the growing interest in cloud computing, according to GE Capital, Commercial Distribution Finance.

At the same time, technology manufacturers are searching for simplified ways of providing financial support on a global basis to the companies that install their IT products and services for commercial customers.

Solution providers once focused primarily on reselling hardware and software to businesses. Today, due to rapidly growing interest in cloud computing, they’re shifting to providing services and related products that are necessary to help customers take advantage of the cloud.

“Instead of making large sales related to one-time projects, solution providers are now offering long-term contracts for shared cloud services,” said Mike Marcolina, senior managing director of CDF’s technology, electronics and appliances business. “That shift to recurring revenue streams is having a major impact on the way solution providers address a range of issues, from working capital management to employee compensation to capital allocation.”

“To keep pace, it’s important that lenders provide flexible financing options as solution providers transition from product-centric to service-centric offerings,” Marcolina added.

IT manufacturers often make arrangements with finance companies such as CDF to support the solution providers that sell their products to end-users. Some manufacturers may have thousands of affiliated solution providers globally. To simplify their financing programs, manufacturers are searching for companies that can offer global solutions.

“There’s a growing preference to have a limited number of financing arrangements as manufacturers continue to expand overseas,” said Marcolina. “Since late 2012, we’ve expanded global programs with Dell and Polycom and we’re working on potential programs with several other global manufacturers.”

CDF provided more than $18 billion in financing to more than 1,300 IT solution providers globally in 2013, up from $15 billion in 2012 — a 19% increase.

To read the full release, click here.