Now, as a stock holder, I want Microsoft to focus on making money. And the potential to lose massive amounts of money on bad financing is pretty high. I would have thought they would have made changes six months ago. Or four.
But now, just as we hear grumblings that the new fiscal year for Microsoft (begings July 1) should be a year of recovery for the economy, they've responded to the credit crunch by destroying their own financing program.
The greatest reason to use Microsoft Financing was that is was easy. A couple months ago I heard a MS employee tell stories about all the interesting things purchased along with the "one Microsoft license" that was required.
That one-license minimum is certainly too lenient. There could be a $1,000 minimum, or a $5,000 minimum, or something higher than "one license."
Why did we use and push Microsoft Licensing? It was easy.
It wasn't the best or the cheapest financing available. But it was the easiest.
Now things have changed.
Effective immediately, please note the following changes:
1. Effective immediately, Microsoft content (software/services) must represent a minimum of 35% of the customer's total financed amount, including taxes.
2. On multiple submissions, At least one of the invoices booked in transaction must have MS content (software/services) listed as a separate line item in invoice and total MS content (software/services) for all must be at least 35%
One Windows license is too little. But 35% of the total, including taxes, seems way too high.
Let's take a look.
Disclaimer: These numbers may not work for you. If they're too far off, go look at a recent project within your company. These numbers are taken 100% from a recent server installation (completed last week). Your numbers may vary. Your clients are not my clients. Your ways are not my ways. Blah blah blah.
|1||Server - Proliant ML 350 etc.||$1,589.99||8%|
|2||Hard drives x $399.99||$799.98||4%|
|2||4 GB RAM upgrade x $129.99||$259.98||1%|
|1||Tape Drive - DAT 160||$869.99||4%|
|10||Tapes - DAT 160 x $29.99||$299.90||2%|
|1||Backup Exec Software||$639.99||3%|
|1||Small Business Server 2008|
Premium Edition with 5 CALs
|1||5-pack Client Access Licenses||$899.99||5%|
|1||Diskeeper 10.0 defragmentation software||$299.99||2%|
|3||Desktop Computers - DC 5800 x $899.99||$2,699.97||14%|
|3||MS Office Standard Edition - License x $399.99||$1,199.97||6%|
|1||Printer - HP 2035 - laserjet||$269.99||1%|
|1||Toner Cartridge for P2035||$89.99||1%|
|1||Printer - Color Laserjet CP3525n||$799.99||4%|
|1||Toner Cartridge set for CP3525||939.99||5%|
I consider this a decent order. A new server. A few workstations while we're at it. One personal printer, one workgroup printer. Perhaps the only thing that's unusual is the workgroup printer. But if it weren't a printer it would be a scanner or something else.
The problem is this:
1) That's a pretty typical order
2) Microsoft software is about 20% of the order.
If we eliminated the workgroup printer (which really means moving it to separate financing), we only gain a couple of percentage points.
Even if we eliminate the labor, we're just at 30%.
(Note on taxes: MS allocates taxes for the Microsoft product as part of their percentage, which leaves all other taxes as part of the non-MS percentage. Unless you have different tax rates for hardware and software, this has no effect on the overall percentages.
If your state does not tax electronically-delivered software, then the Microsoft percentage drops!)
Microsoft says this is not a new policy but a "new clarification to a long standing policy of including Microsoft content in all financed originations."
As a frequent (former) user of Microsoft Financing, I can tell you that this has not been the policy. Everyone involved, from top to bottom, has been very clear that you only needed one Microsoft license to engage Microsoft Financing.
If I have to divide financing between two companies . . . I won't. Once you open the discussion of cutting things and separating things, stuff will get cut from the budget.
Until now my experience with MS Financing has been spectacular. This is true in large part because every time I've used it, the client added more equipment to the order.
Now, if I have to finance part with MS and part somewhere else, three things will happen:
1) More paperwork.
2) The poor interest rates will be more obvious
3) Orders will be smaller instead of larger
How will I avoid this? That's easy:
-> Use other leasing/financing options
I know Microsoft and their financing partners need to limit their exposure to bad credit. I honestly understand that.
But 35% of the total is a deal killer. 20% we can do. 25% we can stretch. But anything above that puts us in a position of juggling multiple kinds of financing for one project. The client sees it all as a single deal.
And you can forget using Microsoft Financing for HaaS.
It was a great program while it lasted. But with a 35% threshold for software on every project, we will simply look elsewhere.
Microsoft's missive says:
"Please feel free to contact your local sales representative for questions on financing transactions or contact Scott D Gilgallon, [email protected], for any WW concerns on the policy."
I think that's a good idea. If you agree with me, point those people to this blog post. But be sure to tell them that YOU have concerns. And if you can't do MS Financing under these conditions, mention that as well.
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We were in the process of ramping up to use Microsoft Financing on upcoming deals. Oh well... "They fixed the glitch"ReplyDelete
I got this back from MS..ReplyDelete
"Thank you for your note. I hope your email is an opening for more dialogue. I reviewed your company’s use with Microsoft Financing and hope that we could discuss. The article was not 100% factual and I would like to discuss if you have a few minutes. Thank you for the email and feedback.
Thanks, Yan. I've received a few more emails about this.ReplyDelete
Not sure what the inaccuracy it. When you find out, please post.
My guess is that the official policy was never "one license," but one Microsoft Product.
Fine. But I have personally been in more than a dozen meetings, and had more than two dozen phone calls in which a Microsoft employee or MS financing representative was very clear about the single license requirement.
We've been in on 8-9 Microsoft Financing deals in the last two years. The people in the field may have all been wrong, but they were amazingly consistent on this point.
Where would you recommend that we look to for equipment financing for customers now that Microsoft Financing is less... appealing? We had been getting ready to ramp up with a serious push on Microsoft Financing, but now, that's less of an option.
I'm in the process of rolling out replacement servers for a client with FPP - so it's all hardware. I checked with CIT (Microsoft's financing people) and they said ANYTHING microsoft would work. Threw in a MS mouse and keyboard and was good to go.ReplyDelete
I don't think I understand why MS really cares. It seems you are dealing with CIT for the financing. Microsoft isn't actually fronting the money from what I can tell. I guess they just want more of the project money to go to them, rather than just a mouse. But like you said - 35% is extreme. Again, CIT is the one actually lending the money. I envision they will bend the rules / say you aren't eligible for MS financing, but we (CIT) will finance this ourselves (at hopefully comparable rates).
And like you said Karl - MS financing was real easy! I've only done a few of these, but they've been my bigger projects that might not have gotten done without it.
We were in the process of doing 2 deals through this program. I've sent an e-mail telling them how our deals work and that requiring over 20% just isn't realistic for a small business. I'm also having the 2 clients that are now financing through Dell (yuck!) send an e-mail telling them why they lost the business.ReplyDelete
Who knows, maybe we can convince them to reconsider...?
I just read your post about this when Maria Reines told me about it today, as I got a $50K approval from them yesterday.ReplyDelete
Apparently, there is a bug in the system that automatically pre-approves certain deals and since I already told my customer they were approved yesterday, they are going to honor my last deal. But they know I am unhappy, they know I’ll probably never use them again since we’ll rarely achieve 35% software content unless we take out ALL of our labor and maybe even some of the hardware in any given deal, it just is dumb because they just spent the last few months reminding everyone WHY this was the perfect solution for SMB sales in this economic climate.
I’m planning on sending my thoughts to our PCM and our T-PAM as well as others in the MS food chain, but I want to give Maria a chance to respond to my concerns and questions and escalate my feedback up her own food chain to see if they can change their minds or at least lower the percentage requirement to a more reasonable level.
I also asked her if she thought we could contact CIT directly and work with them using the zero-payment for 6-months promo like we always have.
We’ll see …
I'm not sure what to tell you on financing. On leasing (which is different from financing), vendors such as Ingram and Synnex still have strong programs, as do may independent outfits.
Financing is another animal. We just looked through our files here and pretty much all of the companies we've used are either gone, bought out, or not doing new business right now.
Local (regional) banks are often a good deal. Some clients come up with their own revolving lines of credit at their banks.
Got a nice follow-up article at CRN magazine:ReplyDelete
To the hungry salesman go the spoils.ReplyDelete
Got a call today from Javier at Balboa Capital. He saw the online discussions and Called to offer up his services.
I'm hoping he's post his info here.
Thanks Karl for the compliment...ReplyDelete
After reading some of the comments, I agree - there has been some major consolidation in the finance industry given the recent economic climate.
Balboa Capital is one of the larest privately held lease finance companies in the US. I finance all types of IT hardware, software and SaaS applications.
Should any partner care to discuss further, please call or email.
It is possible to work directly with CIT financing. I can't give you names, but if you go looking you can probably find the same deal you had before without the Microsoft restrictions.ReplyDelete
You mention SBS2008 PremiumReplyDelete
But not the purchase of another server to run the SQL Part. So Add another 2.2K for the second server.