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Flexible Financing Options Help IBM Customers Fund Complex Projects

Bekins moving company taps financing program to fund $4.2 million IT project.
Some of the toughest challenges of large IT projects are green--getting the "green light" from top executives to proceed with the big plans and coming up with the "greenbacks" to pay for them.

Some IBM customers not only purchase from the vendor the key services and technologies needed for major business-process-transformation projects, they also are funding the projects by tapping into loan and credit options offered by IBM's Global Financing arm.

About a year ago, IBM put together a dedicated line of financing programs for customers of IBM's business-process-transformation services that include IBM reengineering and business-process-outsourcing services. IBM financing options provide agility in funding such projects so customers don't have to come up with all the needed cash or obtain loans from banks to cover the full cost of a project all at once, says Paul Foulkes, IBM's VP of project financing.

As the services side of IBM's business grows, its project financing also is becoming an increasingly important option for business-process-transformation services customers, Foulkes says.

IBM services revenue rose 4% and accounted for $12 billion of the $21 billion in net revenue the company reported two weeks ago for its second quarter.

A number of IT vendors provide customers with financing to help pay for big-ticket purchases. But transformational projects are not "one-time events like buying a car," Foulkes says. They're much more complicated. Financing options offered by IBM include loan-payment schedules that "match up with project milestones and benefits realized," he says.

The flexible financing aims to help customers avoid "cost and benefit mismatches" that often occur during IT projects, which can take time to roll out and for customers to reap the anticipated benefits, he says. The IBM project-financing programs are modeled after the type of financing plans that are more common in the construction industry, Foulkes says.

Among customers that have tapped into IBM's project financing is Bekins HomeDirect USA. The mover of large consumer durable products is automating the scheduling, routing, and tracking of deliveries as part of a $4.2 million project, says Randy Valentino, Bekins' chief technology officer.

Among the expected benefits of the project is "getting better fuel economy through better routing and scheduling," Valentino says. The makeover also includes Bekins providing its 800 truck drivers in the United States with handheld Wi-Fi devices from Intermec Technologies Corp., which will be used to scan and track bar-coded packages, he says. Although Bekins doesn't have plans to deploy radio-frequency identification technology right now, the infrastructure could support the technology in the future, Valentino says.

While Bekins is obtaining $4.2 million in financing from IBM to acquire all the hardware, software, services, and training involved with the project, "we're tapping into the financing as the project rolls out, and we don't pay back until its implemented," Valentino says. "As we gain benefits, then cash goes out the door."

For instance, while a big part of the loan will pay for assets needed early on in the project, such as the handheld devices, "we don't draw on the loan until they are deployed--and so we aren't laying cash out for equipment that's sitting on a shelf," he says.

If Bekins hadn't chosen to use IBM's project financing, "we would've had to go to a bank and start drawing a whole line of credit from day one," Valentino says. The flexible IBM financing allows Bekins to have "better cash-flow planning on a monthly or quarterly basis."