by CIO Staff

Microsoft Broadens Financing, Offers New Deal

Jul 14, 20063 mins

Microsoft extended its financing offerings to two more European countries and also debuted a low monthly payment plan at its Worldwide Partner Conference in Boston this week.

Microsoft Financing, a wholly owned Microsoft subsidiary, provides financing that its partners can offer to small, midsize and enterprise customers to cover spending on software, hardware and services. Each contract need only include one Microsoft element. While Microsoft develops and markets the service, it teams up with financial specialists who handle areas including credit applications, billing and payment collection.

Under a five-year exclusive relationship announced Wednesday, Microsoft will partner with global consumer and commercial financing provider CIT Group to launch financing in France and Switzerland. The companies hope to extend the agreement to other countries by the end of 2007, according to Brian Madison, general manager of Microsoft Financing.

The software vendor already provides financing in 10 countries: Australia, Belgium, Brazil, Canada, Germany, the Netherlands, New Zealand, Spain, the United Kingdom and the United States.

Microsoft plans to offer financing in three to five additional markets over the course of its next fiscal year, which began July 1, Madison said. The aim is to make Microsoft Financing available in the vendor’s top 20 worldwide markets by the end of 2008.

Under its 6/50 promotion also officially unveiled Wednesday, Microsoft customers can finance their IT investment for US$50 per month for six months, and then start paying off the rest of the loan balance in 36 monthly payments. Outside the United States, a user in the United Kingdom, for example, will pay 50 pounds ($92) for the first six months. The program runs from now through June 30, 2007.

Microsoft hopes the program will encourage customers to more rapidly purchase its next wave of major product releases, Windows Vista, Office 2007 and Exchange 2007, Madison said.

The software giant has gradually built up its financing arm since the service started four to five years ago as an incubation project within the Microsoft Business Solutions division.

Why Microsoft got into financing is a question Madison often fields. Research by the vendor shows that customers who can finance their IT investments tend to adopt new technologies sooner and also buy more Microsoft software and partner services, he said.

The software vendor also discovered that financial services companies were reluctant to back purchases of software and services, seeing such a deal as an unsecured loan involving intellectual property that can’t easily be repossessed. In practice, that hasn’t proved to be an issue. “Software is mission-critical,” Madison said. “People tend to stop paying for software at the same time that they turn off the lights and stop paying the phone bill.”

In March, Microsoft Financing lowered its minimum loan size for U.S. customers to $3,000, from a previous limit of $10,000, as a way of targeting small to midsize businesses. The company is looking at rolling out that financing arrangement elsewhere in the world, with Canada the next logical step.

There’s no upper limitation to Microsoft’s financing, and the deals can run over $1 million. The interest rates are competitive, Madison said, with a rough estimate for $250,000 of financing in North America running at between 8 percent and 8.5 percent.

Microsoft’s financing portfolio is just under $500 million, he added.

-China Martens, IDG News Service (Boston Bureau)

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