Sunday, November 16, 2008

Software Companies Offer 0% Financing

Microsoft is the latest software company to offer enterprise customers 0% financing for Dynamics ERP (enterprise resource planning) applications.

This follows SAP's announcement a couple of weeks ago that it would offer interest-free credit for purchases of some of its applications.

That seems like a smart move given the current economy, particularly with unsettled financial markets making it harder to get credit on any terms.

But this won't help customers who can't get credit because their business simply can't afford it. Most companies extend 90-day (or longer) credit to their customers, meaning they're in a world of hurt if their customers go out of business or default. That's why they're having trouble getting credit from banks and other corporate lenders.

This also won't help convince customers who are considering SAAS as a way of reducing their capital expenditures. They've already crossed the philosophical or operational bridges necessary to take that step, and nothing short of the on-demand model is likely to get them back into the on-premise fold.

Moreover, by lowering the TCO on their applications, Microsoft and SAP risk alienating existing customers who are paying interest, and resent seeing their competition get a much better deal.

I wonder what Microsoft and SAP think they really have to gain.

No comments: