*Financing purchases under a Microsoft Enterprise Agreement can help CIOs strategically manage their IT budgets*
REDMOND, Wash. — Feb. 1, 2011 — In the current global economic climate, chief information officers (CIOs) are carefully examining their technology priorities and becoming more involved in financing to meet strategic IT objectives.
Daniel Gasparro of the international law firm Howrey LLP serves as both the firm’s CIO and executive director of operations. His hybrid role of both technical and business leadership has become a growing trend among Fortune 500 and other companies.
“The way we run IT today is more aligned with the business,” Gasparro says. “The economy has forced a whole different dialog within the IT department and changed the way we manage the cash flow across the firm.”
Microsoft Financing General Manager Seth Eisner is seeing more CIOs like Gasparro who understand the relationship between business and technology the way a chief financial officer (CFO) would. Of particular interest to these CIOs is the Microsoft Financing program, which was created eight years ago to give customers added flexibility in how they pay for Microsoft software and services.
The program provides a single financing resource to help customers purchase software and services. Customers can opt to spread their payments over the term of their agreement, thus preserving important cash resources.
Eisner notes that Microsoft Financing is progressive in the world of financing, with a mission to provide financing for the purchase of Microsoft software and services — an asset that traditional lenders often won’t touch in today’s tight credit environment.
“We offer total solution financing,” Eisner says. “We can enable customers to run their business in the way that makes the most sense for them, take advantage of deals in the market, and structure their payments to make it easier.”
Eisner says more than 7,000 companies have benefited from Microsoft Financing, whether to meet budgetary requirements, manage cash flow, or simply because they don’t plan to deploy right away. Microsoft Financing allows CIOs to better match the payments for their software and services with deployment.
“A large percentage of Microsoft’s enterprise business is in annuity programs, primarily enterprise agreements,” Eisner says. “The standard enterprise agreement is paid in three annual installments.”
When interest rates are much higher, that’s not necessarily a bad thing, but from the CFO’s perspective a large periodic payment can also make the rest of the company’s financial picture murky.
Says Gasparro: “Depending on when your payments hit within the fiscal year, it can be difficult to get a clear read on key financial metrics, such as costs as a percentage of revenue. By having this financing option, we can better forecast the impact of IT cost on profitability and manage cost targets much more effectively.”
Another advantage of spreading out the payments is that it can free the business to use funds in other ways, giving customers more purchasing options. Howrey’s financing arrangement has provided the firm with flexibility to proceed with other initiatives. For example, Howrey is exploring the move of some IT services to the cloud.
As more firms start moving to cloud-based offerings, Gasparro says a flexible financing arrangement can afford them a soft landing as well as provide CIOs with the ability to measure the true savings of cloud-based services. It’s a point not lost on Eisner, who spends significant time with Microsoft’s business groups to build financing programs that sync with their plans.
“Our financing solutions are in sync with our cloud-based offerings and new licensing models,” Eisner says. “We’re making sure that we can facilitate that soft landing in the cloud from a financial perspective when customers make the decision to move.”
For the new generation of hybrid CIOs like Gasparro, that conversation is as much about accounting and cash management as it is about technology. For a law firm like Howrey, having a large annual payment commitment is far less advantageous than making predictable, smaller quarterly payments.
“It’s hard to get people’s heads wrapped around the way we do things, because it is unique,” Gasparro says. “But we have a rhythm to our business in terms of our payment schedules. We look for ways to structure agreements that do not conflict with the top-level cash requirements of the firm, and with Microsoft Financing we have been able to accommodate that.”
In Howrey’s case, Gasparro and his team shared their business calendar and the optimum times for payments. Microsoft Financing then produced a schedule that allowed Howrey to build a rate and payment structure optimized for the firm’s business model.
“This schedule allows me to manage my cash flow much more predictably,” says Gasparro. “A lot of vendors don’t have this insight into the rhythm of their customers’ financial plan, but it’s huge for us in terms of managing cash flow on a quarterly basis.”
With a growing bank of success stories like Howrey, Eisner says Microsoft Financing will continue to provide flexible options that make financing work for customers.
“Smart, strategic CIOs want to know what their options are so they can decide when it makes sense to purchase something with cash and when it makes sense to finance,” Eisner says. “There’s a good value proposition here for many companies today, and we’re working to let them know it’s available.”
For more information about Microsoft’s options for financing, please visit the Microsoft Financing Home Page.