Financing the Solutions Ecosystem

REDMOND, Wash. , March 8, 2007 – Over the past three years, Microsoft Financing has focused on building offerings that scale to meet the needs of small, midsize and enterprise customers and their partners.

During that time, the group has partnered with the Microsoft Dynamics division, among others, with a mission to empower small and mid-sized businesses through simple, easy and affordable financing to acquire new technology solutions. Today, financing is becoming an integral part of Microsoft’s sales and marketing efforts around the world.

Brian Madison, General Manager, Microsoft Financing

Microsoft Financing is unusual in the industry, in that it will take care of the entire transaction. Customers can choose to finance the software itself, or the entire technology platform including software, partner services and hardware implementations.

This allows small and midsized companies to get up and running with a new technology, while paying for it over time. For many, this means the solution can essentially pay for itself as it is being used.

The group funds transactions from US$3,000 up into the millions, with convenient online transaction processing and a variety of payment structures to meet the needs of almost any customer — such as the popular 6/50 deal structure, which allows customers to acquire a total solution and pay only US$50 a month (or relevant local currency, e.g. $50 CA, £50) for the first six months. 6/50 customers then pay off the rest of the loan balance in 36 monthly payments.

Next week at Convergence 2007, Microsoft Dynamics’ annual customer conference (being held in San Diego, March 11-14), Microsoft Financing is coming full circle, with several representatives onsite to help Microsoft Dynamics customers understand the financing options available to them.

To get an update on the group, its roots, programs and vision for the future, PressPass sat down with Brian Madison, general manager of Microsoft Financing.

PressPass: How does financing from Microsoft create value for partners and customers?

Madison: We look at this as a benefit to the overall ecosystem. For customers, it’s an opportunity – many of our customers have a desire to implement their optimal technology solution today, but may not have the means to do so from a budgetary standpoint.

Financing allows customers to meet their entire needs today, get the utility of the solution today, have a better implementation today, so they can immediately begin to realize the productivity benefits of a new technology. This simple idea of financing the solution allows customers to accomplish their technology goals now, and pay for it as they actually get the benefits over time.

From a partner standpoint, it really comes down to the basic benefits of financing. They are able to close sales sooner because it makes it easier for the customers to say yes. They are able to close larger transactions. In the Microsoft Dynamics space, we know on average financed deals are typically 44 to 90 percent larger. The fact we will fund an entire transaction within days after implementation is also a huge benefit to our partners and their business in terms of cash flow.

In addition, we’ve found once customers do a financing transaction, they come back and they buy more often. Customers are able to get a better solution, better service and stay current with technology because, quite simply, they can afford it. We make it easy for them. When a customer does business with Microsoft Financing, they’re going to get very competitive terms and conditions spelled out very clearly up front, so it’s a ‘no surprises’ environment when you do business with us.

PressPass: How has your business grown and changed in the past 18 months?

Madison: Along with moving the minimum transaction sizes down to $3,000, we’ve also enabled better self-service capabilities by adding online transaction processing. Partners can now submit an application for their customers and get approval back within minutes. They can also see the progress their transaction is making; it is faster, simpler and more convenient for them to work with us.

With our 6/50 deal structure, the uptake is really starting to kick in. About 25 percent of the business we’re doing today falls under the 6/50 program. So that speaks to the fact word is getting out. We’re also finding it’s moving into the larger transactions as well; so $500,000 and even million dollar transactions are starting to take advantage of the deferral structure we’ve put in place, whereas earlier it was primarily small businesses.

We’ve also expanded into several new markets around the world. In April we’ll be rolling out in Italy and Korea, and we’re right on track to achieve our goal of entering the top-20 global markets by the end of 2008.

PressPass: How has the relationship between Microsoft Financing and Microsoft Dynamics evolved?

Madison: Microsoft Financing worked with Microsoft Business Solutions group (now Microsoft Dynamics) as our incubation partner when we first started. As a startup, they were the one place in Microsoft that really embraced the idea of financing early on, and in fact, the first nine countries we entered were all Microsoft Dynamics markets. At this point 11 of the 12 countries in which we’re available have Microsoft Dynamics as one of the components of Microsoft’s offerings. In these more mature markets for us, financing penetration is starting to exceed 30 percent of the new Microsoft Dynamics sales, so they’ve been a great partner for us.

As we’ve grown, one of the things we’ve done is expand the breadth of the customers we can serve. We’ve worked our minimum transaction size down to $3,000 in North America, and in the European markets down to 1,000 euros and pounds. This helps us serve some of Microsoft Dynamics’ smaller customers.

On the other hand, as we’ve grown and developed over time, we’ve also enabled our partners to take on some very large transactions. We’re supporting multi-million dollar Microsoft Dynamics CRM installations in some locations as well.

If you look at distribution channels and specific business segments Microsoft Dynamics represent, one of the core tenets of our business is to be able to support them, and they’ve been a great partner so far.

PressPass: What will Microsoft Financing bring to Convergence this year?

Madison: We’ll have people onsite at Convergence with whom partners and customers can work to understand some of our big value propositions. We tailor solutions to our customers, so hopefully they’ll take advantage of the opportunity to discuss options with us face-to-face, and get some help with their needs and questions. And we’ll also use the event to build on our momentum with the 6/50 promotion.

PressPass: What is Microsoft Financing doing to help drive adoption of the new Windows Vista and the 2007 Office system?

Madison: Microsoft has some great new technology solutions, and if we can make it easier for customers to acquire that new technology, then we feel like we’re complementing that effort in a pretty big way.

Many customers are taking advantage of our 6/50 worldwide promotion because, with

Windows Vista and the 2007 Office system, a lot of companies are going to choose to acquire new hardware as well, to facilitate the best performance from those new technologies. So we give companies the ability to finance the software, services and also the hardware, making it possible for them to upgrade the desktop across their environment. Our ability to finance the total solution is a unique and valuable thing in this industry, and complements Microsoft’s new technology packages.

We will also continue to offer regional promotions to meet local market needs. For example, in France we currently have a 2.9 percent financing offer for Microsoft Dynamics CRM, to add CRM capabilities to any organizations that use Microsoft Office applications.

PressPass: What is your vision for Microsoft Financing for next year and beyond?

Madison: Basically we’ve had the same vision laid out since day one – a financing offer for every customer. We’re gaining fantastic traction with that, and there are some pretty exciting things on the horizon for us.

It ultimately comes down to making the business of financing easy to understand, simple to use and affordable for the customer. To achieve this, we need to make sure every customer understands how it can help their purchasing, and we rely on our valued partners to walk them through the analysis. We currently provide a financing quote for any customer queries run through the Microsoft Product Licensing Advisor (MPLA).

We also are strategically integrated with any new product launches for Microsoft, including Microsoft Dynamics NAV 5.0, Microsoft Dynamics GP 10.0 and Microsoft Dynamics SL 7.0, because we complement both the launches and the new channels Microsoft wants to be in.

Ultimately, the idea is to create an environment where it is affordable for customers to acquire new software solutions, and profitable for Microsoft’s industry partners as well as its customers, because they get to take advantage of new technologies that help grow their business and improve their productivity. Customers and partners alike have given us feedback that the approach Microsoft has taken with regard to financing is achieving those goals. We will continue to refine and improve the process for everyone involved.

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