With more IT consumption being paid for through multi-year subscriptions and subscription-based IT financing, the dynamics of risk are shifting for partners and for TD SYNNEX, especially in the context of evolving XaaS financing options. We spoke to Steve Philp, regional finance director, and Nick Tiltman, credit services director, about what’s changing and why it’s more important than ever for partners to share financial information.
Managing risk is important to all businesses – and having access to credit and finance options is vital to growth. When a partner has a good opportunity, it’s often TD SYNNEX that will provide the financial support to make it happen. That’s straightforward enough when a partner is providing, for instance, 100 laptops. If the deal is for 5,000 licenses for Office 365 over five years, it becomes a different equation and a different kind of risk, both for the partner and for TD SYNNEX.
The shift to multi-year subscriptions for software and XaaS services is changing the market dynamic. For TD SYNNEX Advanced Solutions, more than 50% of business now comes from recurring revenues. That’s only going to increase as more software and a proportion of hardware moves to an everything-as-a-service (XaaS) business model.
This is a seismic change for credit and finance in the channel. One that’s ‘very exciting, but also a bit scary’, says Steve Philp, regional finance director, UK and Ireland at TD SYNNEX. ‘Things are changing but the key message we have for partners is that we are open for business and we have creative ways of providing XaaS financing.’
New Challenges and Emerging XaaS Trends
With extensive resources at its disposal, Steve is confident TD SYNNEX can find a financial solution for almost any scenario. To do that it will need to be both flexible and creative. New challenges keep arising, such as the increasing number of partner businesses that are now springing up to address opportunities with AI or becoming ‘super specialised in very narrow verticals.’
One current example is a business deploying complete solutions to address the DORA (the EU’s Digital Operational Resilience Act) regulations. The end-user customers here are blue-chip financial organisations, and the multi-year deals the partner is entering into can be worth in excess of £10 million, but the net worth of the partner business is only perhaps £500,000 and they are managing not one, but multiple contracts on this scale.
These ‘start-up’ businesses present a different kind of challenge for the credit team, says Nick Tiltman, credit services director, UK and Ireland at TD SYNNEX. ‘Some of the new entrants are tiny, yet they are selling multi-year subscriptions that could be for £30,000 a week. It’s difficult to write a credit line on a business like that.’
Helping Us to Help You
TD SYNNEX has been assessing partners on more than just their financial performance for many years. The team is trained to look beyond the figures – at the people, the strategy, and the prospects for a business. They are now also having to look at businesses in much more detail and at the longer-term picture. As Nick points out, it’s a different kind of risk, and this is why TD SYNNEX is now asking for partners to be more open than ever with its finance and credit teams.
‘We need partners to get comfortable about sharing their cashflows and plans, their management accounts and balance sheets with us. We will still look at the other aspects of the business, but we need to see more of those hard numbers. It’s really a matter of helping us to help you.’
There is no reason for any partner to be worried about sharing information with TD SYNNEX. Clearly, all the information will remain entirely confidential, and as a trusted distributor, TD SYNNEX will never sell direct to end users. Even if it is necessary for TD SYNNEX to be visible as the company providing the finance, it will still be at arm’s length.
Flexible Anything-as-a-Service Financing Options
As business shifts further towards subscriptions and multi-year deals, working together and exploring imaginative ways to finance deals will become more important. TD SYNNEX Capital – the company’s wholly-owned finance arm – has already started to find and provide more flexible options for partners where they are needed, particularly in the realm of XaaS financing.
For example, it has set up several arrangements where the partner takes staged payments to cover the duration of a contract, allowing the business to manage its cashflows in line with the payment schedule it has agreed with the end customer. Steve expects to see more requests for this kind of arrangement and noted that, with TD SYNNEX Capital, there are no limitations on the kind of solution that can be financed. Hardware as well as software from multiple vendors and XaaS providers – and even the partner’s own value-added services – can be included.
Nick also sees TD SYNNEX Capital becoming a viable alternative to simple credit. There is no shortage of options when it comes to financing deals, and to make it easier for partners to make the right choice, TD SYNNEX has started working on an AI-driven process that will enable faster, more accurate, and fair assessments of different scenarios. Increasingly, TD SYNNEX Capital will become a one-stop shop for these options, particularly in the context of the evolving XaaS business model.
Supporting XaaS Companies with Subscription-Based IT Financing
In terms of hard numbers, the total amount of credit TD SYNNEX now provides to UK partners is more than £2 billion. That has increased by £250 million in the last 12 months – a rise of around 15%. Steve Philp expects the growth of that total credit line to keep on rising at about that rate for the next couple of years. As it does, the challenges will grow – for TD SYNNEX and its partners.
The sharing of information and open dialogue between partners and TD SYNNEX will become even more critical as demand for finance and credit continues to grow. ‘We are almost asking them to let us into the board room,’ says Nick. ‘We need to build closer relationships with partners who are doing these big deals and maintain the communication throughout. If it’s a five-year deal, we need to keep in touch with what’s going on with the customer. We can’t just do the deal and move on to the next one.’
SMB partners that are on a growth curve will also need to share more information, said Steve. ‘We had one SMB partner recently who had come across a really good opportunity, but they were credit-constrained and struggling to execute. We worked through a solution together. They gave us sight of their management accounts, they put some money in, and we’ve taken some risk. We asked them some searching questions, and they asked us to stand behind them. It was a really open and positive dialogue.’
For SMB partners, tools like TD SYNNEX’s Credit Elevator, which enables you to keep lifting your credit limit in controlled stages, without having to constantly re-apply – and the personal relationships that the company’s experienced credit team have built up over the years, are still there and remain an important part of the overall service offering. Making it personal has always been important in credit.
Let’s Work Together
As customers continue to migrate to multi-year subscriptions, there will be more growth opportunities for more partners – at SMB partner level as well as in the corporate sector. Some will be straightforward, others more complex and entail higher levels of risk. Partners will need to call on the options and tools available from TD SYNNEX and TD SYNNEX Capital much more. In doing that, they will need to be open and transparent, share more information, and work with TD SYNNEX to find the right options for the customer and their own business.
In the end, it is all about confidence and trust, and as the trusted advisor to the channel, partners will increasingly look to TD SYNNEX to provide the financial services and support they need to minimise their risk, maximise their potential, and maintain long-term fiscal stability and prosperity through XaaS financing and subscription-based IT financing.
TD SYNNEX Capital helps businesses scale by making IT solutions more accessible through flexible, affordable financing options.
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