february 2010 kay stephenson financial client executive selling to the cfo

February 2010

Kay Stephenson Financial Client Executive

Selling to the CFO

IBM Global Financing

© 2010 IBM Corporation2

Agenda

Financial Markets & the Impact on I/T Selling

Financial Selling as part of the Total Solution

Addressing CFO Priorities

IBM Global Financing Toolkit for Business Partners



Changes in the financial markets Sub-prime meltdown

$Ts global asset write-downs

Loss of liquidity, credit markets conserving cash

Bank/Financial institution failures and acquisitions

Increased corporate defaults especially speculative grades

Increasing default rates on multiple asset classes

Increased number of bankruptcies

Cutbacks in personal & corporate spending

Increased unemployment

Weakened US economy



Impact to our clients

Stock market turmoil

Economic uncertainty

Tightening credit markets

Access to capital shrinking Less credit available in the

market, and more restrictions

Costs of external capital rising

Credit lines needed to support core business needs

Pressure on spending CFO involved in decision-making

Near-term investments must have strong business case

What has not changed:

The future success of any client is still dependent on their ability to invest in meeting their customers’ needs and improving their competitive position



What does this mean to I/T sellers? Understand health of client’s business

– Annual reports, analyst reports, company website

– Utilize online tools (i.e. Yahoo! Finance, Google Finance, www.cfo.com)

– Not every client is creditworthy

Understand industry dynamics and their position in industry

Validate opportunity with finance team/CFO in addition to the sponsor/line of business exec, know current approval process

Incorporate financial justification (business case) in proposals

– Focus on payback and timing of ROI

– Translate I/T costs into business value

– Helps your sponsor sell internally

Financial Selling is key to providing theTOTAL SOLUTION Selling

– Positions you as a trusted business advisor



Financial Selling 101

Helps YOU align I/T costs with BUSINESS VALUE

Allows YOU to discuss the true TOTAL COST of OWNERSHIP of the solution

Enables YOU to overcome client objections and CLOSE THE DEAL

Elevates YOU up the client decision chain

Understand client requirements and funding sources

Engage IGF early

Create a VISION for the potential VALUE

Make TCO the client’s evaluation criteria

Enhance the

Include a monthly payment option in all your proposals

Using financial values, metrics & approaches as a part of the sales process

Relating financial metrics to the client’s business objectives to support your solution

Demonstrating to the client that you understand their business

What is Financial Selling?

How Financial Selling Changes the Game

Leading with a Financial Selling Approach



Addressing the CFO’s priorities

Cash Flow Improvements

– Preserve cash

– Reduce spending

Risk Avoidance

– Operational

– Investment

Short-term returns

– Shorter payback periods

– Realize ROI < 12 months



Cash Flow: Preserve Cash

Every source of cash has a cost

– Bond placements (underwriting costs, settlement fees)

– Stock placements (EPS dilution)

– Bank facilities/lines of credit (origination fees, indexed rates, covenants)

– Retained earnings (opportunity cost – business growth)

In the current economic environment,

do not assume that your client still wants to pay cash.

In the current economic environment,

do not assume that your client still wants to pay cash.



Cash Flow: Preserve Cash

Large Upfront Expenditure Affordable monthly payments

Most clients are interested in….–Additional source of credit that does not impact current credit lines

–Access to low-cost funds, even if they are not interested in leasing

–Better terms and greater flexibility than current bank facilities

IBM Global Financing offers credit qualified clients an alternative source of cash at competitive rates,

often below market, with flexible terms

IBM Global Financing offers credit qualified clients an alternative source of cash at competitive rates,

often below market, with flexible terms



Cash Flow: Reduce Spending

Facilitates cost-effective technology upgrades

– Mid-lease or End of Lease

– Holds or reduces monthly payment

– Reduce potential for book losses

– Gives I/T Management more control over technology upgrades & refreshes

$271,774

$225,634

$0

$50K

$100K

$150K

$200K

$250K

$300K

POWER6 570 Purchase

POWER6 570 Lease

17% savings over purchase

FMV leasing lowers total cost of ownership

– Reduces upfront cash investment

– Lowest monthly payments

– Pay for portion of asset used (IGF takes residual value position)

– IGF assumes costs of disposal

New monthly payment is 5%

lower than original lease

payment

Est

. mon

thly

pay

men

t ($)

Lease Term (Months)

Initial 36mo Lease

12 4836

POWER5+ 570

$6,079 / month*

24 60

Technology Upgrade

New Base Lease

36mo

POWER6 570 MES Upgrade

$6,378 / month*

Based on 36 month FMV lease at Best Credit ratesBased on 36 month FMV lease at Best Credit rates



FMV Leasing can lower IT acquisition costs by 10-20%

over outright purchase – Optimize price performance

improvements

– Residual value position by lessor

– Transfer risk of obsolescence to lessor

– Transfer cost for Disposal of Asset

– Avoid higher maintenance costs on older equipment

Cash Flow: Reduce Spending Focus on Total Cost of Ownership

Acquisition CostAcquisition Cost

SecuritySecurity

DeploymentDeployment

DowntimeDowntime

Asset ManagementAsset Management

SoftwareSoftware

MaintenanceMaintenance

PowerPowerSpaceSpace

10%-50%

50%-90%

Consider price performance & total operating costs

TCO Review usually favors a shorter refresh cycle



Risk Avoidance: Operational Risk

Leasing/financing helps client to: – More closely align the costs to the expected benefit

– Improve short-term return on investment

– Accelerate break-even/payback on a project

Project Costs

Project Benefits

Financed

Payments

Use of deferralcan furtherreduce risk



Risk Avoidance: Investment Risk

FMV Leasing transfersrisk of obsolescence

– Rapidly changing technologydriving shorter cycles

– Asset value drops ~50-75%in first year of ownership

– Potential for book losses

FMV leasing transfers risk of proper disposal

– Growing legislation surrounding environmental issues and data destruction

– IBM Global Financing has experience and expertise to ensure compliance with all environmental legislation

0%

20%

40%

60%

80%

100%

0 1 2 3 4 5

Book Value

Asset Value



Return on Investment – Break Even Analysis

Typical ROI for a Purchase SW Acquisition

-80000

-60000

-40000

-20000

0

20000

40000

60000

80000

1q 2q 3q 4q 1q 2q 3q 4q 1q 2q 3q 4q

Net Cost

Net Benefit

Result

Typical ROI for a Financed SW Acquisition

-80000

-60000

-40000

-20000

0

20000

40000

60000

80000

1q 2q 3q 4q 1q 2q 3q 4q 1q 2q 3q 4q

Net Cost

Net Benefit

Result

ROI analysis compares the costs to the strategic value of the I/T initiative

CFO analytics for comparing the relative value of projects competing for funding

– Payback/Break-Even (BE)

– Net Present Value (NPV)

– Internal Rate of Return (IRR)

Contact your FSE or Channel Rep for assistance on ROI calculations



Return on Investment – NPV analysis

Low Rate Financing and FMV leasing enhances the NPV of a project

Description Purchase Price TermMonthly Payment

Total of Payments

PV of PaymentsPV as % of

Purchase Price

Server $300,000.00 36 $7,830.00 $281,880.00 $248,075.20 82.7%Software $50,000.00 36 $1,481.50 $53,334.00 $46,937.86 93.9%Installation Services $10,000.00 36 $315.60 $11,361.60 $9,999.05 100.0%

TOTAL $360,000.00 $9,627.10 $346,575.60 $305,012.10 84.7%

This represents a savings of 15.3% over Cash Purchase !!

Assumes FMV lease at Best Credit Rates on hardware, with IBM Global Financing low rate financing on hardware and softwareCustomer incremental borrowing costs estimated at 9%



Return on Investment ROI analysis compares the costs to the strategic value of the I/T initiative

– Net Present Value (NPV)

– Internal Rate of Return (IRR)

– Payback/Break-Even (BE)

Allows client CFO to compare the relative value of projects competing for use of available funds

ROI

$ $ $

Years Years Years

Maintenance

Services

Phase I

Phase II

Phase III

Year 1

Year 1

Year 1

Year 2

Year 3

ROI

Major cost / returnmismatch

Improved cost / return alignment

Year 1 Year 2 Year 3

Phases I - III

ROI

Costs more closely aligned

to expected returns

BAU Term Financing example IBM Project FinancingTM example

Year 1 Year 2Year 3

Hardware



Increase your odds of winning with IBM Global Financing!

WinLose

Odds of winning increase 36% for partner sellerswhen IBM Global Financing is involved

IBM’s Odds of Winning

IGFIGF

125% higher odds with IGF working with small

clients (<1000 employees)

37% higher odds with IGF for Power Sys

deals, 36% for Storage deals

88% higher odds with IGF for deals that have

very long sell cycles

2008 IBM Market Intelligence study of STG opportunities found thatIGF involvement causes an increase in IBM’s odds of winning

36% higher odds with IGF for opportunities over $100K owned by

BPs



Smarter Financing Toolkit

Low Rate Financing on IBM Hardware & Services

As Low as 0% Software Financing

Deferral Programs

IBM Certified Pre-Owned Equipment



Low Rate Financing for IBM Hardware & Services

Below market rates offered to credit qualified clients on IBM products

Financing rates as low as 2.20% in the United States or 0.50% in Canada for eligible hardware

As low as 2.80% in the United States or 2.60% in Canada on eligible Global Business Services

Minimum transaction sizes as low as $5,000

Almost every IBM brand qualifies, from powerful IBM systems and storage to IBM services



As Low as 0% Software Financing

Zero percent financing offer for multi-year licensing deals of Lotus Software

IGF Low Rate Software Financing on all IBM SW deals less than $1.5M provides qualified clients with an attractive financing alternative

One Year Two YearInvestment Grade

Quarterly payment 50,000$ 25,708$ Total payments 200,000$ 205,664$ Implicit Interest Rate 0.00% 3.22%

Non-Investment GradeQuarterly payment 50,350$ 26,404$ Total payments 201,400$ 211,232$ Implicit Interest Rate 1.87% 6.37%

Assumptions:Purchase Price = $200,000Quarterly Payments in AdvanceFirst of the month billing optionBased on 4Q acceptanceRates will vary based on customer credit rating

Ask your IGF Channel Rep about the Software Cheat Sheet!



Deferral Programs

Payment deferrals up to 90 days for Qualified clients

– IBM Hardware, including IBM Certified Pre-Owned Equipment

– IBM Software and Services

– Fair Market Value and Full Payout leases/loans

– 1-3 month no payments, followed by 36 monthly payments

“No charge” 6 month deferral on select Power systems

– Fair Market Value only

– 7037, 7047, 9111, 9116, 9131 and 9133 only

– 36 monthly payments following deferral

– $25K - $1M deal size

Subject to credit approval



IBM Certified Pre-owned Equipment

Fully refurbished and tested to IBM standards

IBM maintenance qualified

90-day quality satisfaction guarantee

– With IBM maintenance contract

Wide range of equipment available

– Off the shelf or custom-configured

Systems and features at a fraction of the original price

Less stringent credit requirements for purchase or financing

The Future is Green with IBM



Reseller Financing

Inventory Financing

Accounts Receivable Financing

Large Sale Financing

Asset Based Loans

Revolving Credit Lines

45 days free on x Series Products



Reseller Benefits

»Increased Credit Capacity

»45 Days free financing on x-Series (paid by IBM)

»100% Advance Rates

»Online Account Management

»Ease of business – credit line available for all suppliers

»Flexible Structures – match repayment terms to Accounts Receivable turns

IBM Global FinancingReseller

Distributor

2. Ships Product

1. Issues PO

4. Pays Invoice

5. Invoices Reseller

6. Pays Invoice

3. InvoicesIBM

Inventory Financing with IBM Global Financing



IGF Top Value Propositions in Today’s Economy

Provides alternative source of cash/capital/funding

Provides lower costs of hardware acquisition

Reduces client operational, investment & supplier risks

Improves short-term return on I/T investments

Accelerates the implementation of technology



Additional Resources



Links to more information

IBM Global Financing Offerings

IBM Global Financing Speed Sheet

Financial Selling Education Modules

Planning Rate On-line Calculator

Rapid Online Financing Tool

Winning with Financing Flipbook

C-Suite Selling with IGF Just Got Simpler

Analyst Reports, White Papers & Case Studies

february 2010 kay stephenson financial client executive selling to the cfo

Documents

ibm corporation

financial selling changes

business value

financial metrics

financial values

business partners

agenda financial markets

cfo slide