IBM loans SMBs $1bn to buy stuff
The Big Blue Bank
Big Blue wants to make more sales in the small and medium business space, and it is shelling out $1bn over the next 18 months to make it happen.
IBM is as much a bank as it is a maker of hardware and software and a peddler of services. Big Blue can borrow money at rates that few companies and no consumers can thanks to its stellar credit rating and can loan that money out to its reseller channel so they can stock their shelves and to customers so they can finance those acquisitions of servers, storage, software, and services.
At the end of the second quarter, IBM had $29.8bn in total debt on its books, with $23.4bn of that being for the Global Financing unit that finances, leases, and rents IT wares to partners and users. Of course, it takes a vast base of customers – Global Financing has 125,000 customers – and a lot of lending to make money. And in the second quarter, Global Financing had $519m in revenues. But IBM was able to wring $496m in pretax earnings out of its asset base and wheeling-dealing.
By IBM's definition, being an SMB means having fewer than 1,000 employees, not any particular revenue level. And with more than 65 per cent of global gross domestic product being generated by SMBs, who account for more than 90 per cent of the tens of millions businesses worldwide and who employ a similarly large share of the global workforce, IBM and, more importantly, the channel partners it has designated to chase these smaller firms, cannot ignore this segment of the economy.
Hence IBM is adding another $1bn in additional dough to the Global Financing piggy bank to help the company and its partners sell more gear over the next 18 months. The financing, which is available under the brand Cost Buster, is available worldwide, with restrictions in certain countries.
Stack 'em up
IBM has packaged up 29 different stacks of servers, storage, and software for the Cost Buster program, which you can see here. Ed Abrams, vice president of the midmarket business at IBM, tells El Reg that the Cost Buster deals do not include any bundle discounts, just financing. The setups are focused on cloud, back-end systems like payroll and accounting, customer relationship management, and business analytics.
Most of the systems in the Cost Buster program are running on x64-based System x servers, but there are a few that are running on Power Systems iron, according to Abrams. Many include entry IBM storage arrays and Tivoli security and management tools, Cognos data warehousing, WebSphere middleware, and Rational development tool software from IBM. The idea is to get a solution for 100 users down to a few bucks per user per month – something that an SMB won't sweat investing in and will be happy to finance.
Global Financing is offering IBM's software under a zero per cent rate for a 12 month term if you have great credit. For the hardware part of the deal, those with the best credit can get a full payout lease with a 36 month term for as low as 3 per cent. The financing rate will vary depending on a customer's credit rating, term of finance, offering type (in-house or cloud), and equipment type and options, and will vary by country, too.
Abrams did not want to talk about how much money IBM generates from SMBs – Big Blue does not report figures for this segment in its financial reporting, as it does for various industries, and thus Abrams cannot talk about it – but he did confirm that IBM has "several hundred thousand" SMB customers. It should be something on the order of around 500,000, if history is any guide. "Our SMB business continues to grow and is an important part of IBM's future," Abrams said. ®