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Q&A: Why add consumption financing to your handy dandy sales satchel?

The pay-as-you-go model is for end users that aren’t 100% cloud

September 01, 2022

Q&A: Why add consumption financing to your handy dandy sales satchel?
Are you offering a good enough mix of financing options to get deals done?
 
Is your competition?
 
It’s critical for IT solution providers to meet their customers where they are—or someone else will. Since many make-or-break sales conversations start with financing, savvy Ingram Micro partners are adding consumption financing to their proposals.
 
Simply put, consumption financing (CF) enables your customers to pay for technology in the way they want to consume it. We sat down with our CF experts to explore the model in greater detail.
 
Consumption financing Q&A
 
What’s the simplest definition of consumption financing? 
CF is the ability to offer “pay-as-you-go” aka “usage-based financing” for on-prem technology. The difference from other financing is that it’s tied directly to your usage. Ingram Micro has partnered seamlessly with Huntington Technology Finance—a leader in the model—to provide your clients with a solution for their consumption needs.
 
This is a unique, vendor-agnostic solution that helps the channel build offers for their clients where they can pay for the tech as they consume it. It is available as an alternative option to companies that are not ready (or able) to move to a cloud-based solution.
 
How is CF different from other financing, such as annuities? 
Annuities normally have fixed terms and payment structures rather than a true billing based on usage in arrears. CF is based on an organization’s usage, which can save them a lot of money if done right.
 
Which end user is the ideal candidate for CF?

A solution provider’s clients may be candidates if they want:
  • Variable payments tied to usage
  • No upfront costs
  • No fixed monthly bill
  • Flexibility to grow into usage and evolve as needed
What size deal makes sense for such a model?
The ideal transaction size must be $2M+ over the length of the deal. This minimum makes sense due to the amount of work to operate, ramp up and overall usage. It often requires more from the solution provider in terms of goal setting and building the model to fit the end user.
 
Why should solution providers care about CF? 
It’s another financial solution that allows their end users to grow into their usage or workload—without outlaying large sums of capital upfront. It also helps to mitigate some of their end user risk, while also allowing for full revenue recognition up front. It’s on-prem, obviously not a solution for every situation, but it gives them the ability to offer cloud-like pricing to their end clients.
 
Why haven’t we seen the term “consumption financing” much in the channel until now?
It’s a complex financing solution that has historically only been offered by specific vendors for their products. Adoption was hard a few years ago, but that’s starting to change. With Ingram Micro’s partnership with Huntington Technology Finance, we’re able to expand that to be vendor-agnostic. Huntington is a market leader, and our goal is to grow this segment with our partnership.
 
Is CF expected to be the “new way” of financing?
No, we don’t project that. It’s not for everyone; if it were, it would be on every line card. However, it’s a valuable, alternative financing arm that can help grow your business. It’s often the ideal solution before a company moves to the cloud. At Ingram Micro, our job is to help our partners present all the options for financing. CF often leads to bigger conversations, bigger deals and bigger relationships.
 
If you had a crystal ball, what does CF look like in 5 years?
Technology solutions are becoming ever more complex. Most customers are working with multiple vendors to accomplish their end-clients’ goals. Having a CF option allows these customers to transform their business and pay for the technology in a way that meets their cash flow needs. We see the adoption of CF continuing to grow. A recent study showed that more than half of service providers are offering clients alternative payments or financing models, so you may lose out on opportunities if you aren’t bringing CF to the conversation.
 
Download Consumption Financing Sheet