Jason T Hesse speaks with Dan Ransdell from IBM Global
Financing about how the company has managed to thrive in the
recession, and how it aims to grow in 2010.
Since joining IBM some 28 years ago, Dan Ransdell has moved
around the company quite a few times – indeed, he has worked in
sales and distribution, the hardware products division, the
services division, and of course global financing. In fact, he is
on his second rotation into global financing, where he is now
general manager of worldwide client financing.
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IBM Global Financing is divided into
three lines of business: Commercial Financing, which deals with
short-term loans; Global Asset Recovery Services, which deals with
all of the used equipment and end-of-lease assets; and Client
Financing, for which Ransdell is responsible globally.
“Client financing is really the group
that writes all the new leases and loans for customers that want to
acquire software, hardware and services,” he explains.
Although it is a captive finance
company, Ransdell says that he will happily finance other OEM
equipment, too.
“As a general rule, we like to finance
solutions that do have some IBM content, but some of our customers
use us for other brands of IT too,” he says, adding that this is
particularly the case when financing through the channel.
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Ransdell is obviously passionate about
what his company has to offer. This becomes particularly clear when
he talks about what solutions the lessor can provide.
“We’re in the business of helping
facilitate customers’ ability to acquire solutions – they don’t
just want a piece of hardware, they want a total solution,
including software and services, too,” he explains.
But the ‘total solution’ concept is
certainly not new. While the majority of companies in the
technology space now offer all-encompassing deals; it is widely
acknowledged that IBM has pioneered the concept.
According to Ransdell, in the
mid-1990s, hardware accounted for over 50 percent of IBM’s revenue.
Today, this figure has fallen to around 20 percent.
Steady results
Certainly, IBM Global Financing’s
metamorphosis into a total-solution provider has, by all measures,
been successful. Today, the company has an asset base of $36
billion (€24.4 billion), and a receivables portfolio of $22.7
billion, which it has managed to keep healthy despite the economic
turmoil. Indeed, at the end of the second quarter, 59 percent of
the portfolio was investment grade.
Admittedly, the captive saw a slight
fall in revenue, by 10 percent, to $600 million at the end of the
second quarter; but this was largely made up by the company’s
increased levels of profitability – pre-tax margins rose by 9
percentage points to 45.8 percent at the end of the second
quarter.
“Sure, we’re here to help customers
acquire hardware, software and services; but we’re expected to do
so in a financially responsible manner, while contributing to the
bottom line,” Ransdell says.
IBM Global Financing’s liquidity comes
from both the parent and from the market. Today, the company is
leveraged 6.9 to 1, and Ransdell says this has positioned the
lessor well, giving him access to the debt needed to run the
business.
Sticking to its ‘core
knitting’
But how has IBM Global Financing
managed to keep its position in the market place?
Ransdell believes this is because the
lessor stuck to its core competencies – IT hardware, software and
services – which has enabled it to find itself in a strong position
for when the markets recover. For example, in June this year, IBM
Global Financing announced that it would make $2 billion available
to finance IT initiatives in key economic stimulus projects
throughout Europe.
The move, which was designed to help
organisations invest in IT projects in 2009 while awaiting
government funding, was both welcomed by European business, and
demonstrated IBM Global Financing’s strength.
In 2010, Ransdell says, the company
will continue to expand and focus on offering a total solution –
and will be looking closely at the emerging markets, where the
captive sees one of its most important growth opportunities.
“That’s where we see the most growth.
When we see that IT spend in an emerging market is coming up to a
sustainable level, and if there is a need for financing in those
countries, we’ll always look at moving there,” he explains, adding
that the geopolitical environment and the legal system are also
important factors to consider. “Last year we expanded into six new
countries, and we’re constantly looking at how we can expand even
further.”
