Cisco Capital: Pay-as-you-go cloud tech - Elliott Handworker
Being invoiced for what you use is the norm for public cloud users, whether this is for storage or for the use of specific applications. Elliott Handworker, a contributor to the latest edition of of FDE TV, explains how Cisco Capital has developed a variable-consumption financing model to help cloud-service providers acquire state-of-the-art technology assets.
Cloud technologies have changed how business is conducted. The International Data Corporation (IDC) recently announced that global sales of cloud infrastructure equipment grew by 21.9% to $29.0 billion in 2015. According to Elliott Handworker, regional manager of architectures at Cisco Capital EMEA, this trend has led new companies to become public cloud-service providers.
"Your cloud provider is no longer your traditional telecoms manufacturing provider - it could be a mobile phone company; it could be a utilities company for your gas and electricity. A cloud-service provider is now more of an experience provider," Handworker says. "It's what a consumer can use; it's what people can offer in the market."
Public clouds have prompted the pay-as-you-go mindset in consumers and business executives. Handworker says that this mindset is also prevalent in those seeking to acquire equipment used to host a cloud service. As a result, Cisco Capital, which works in customer leasing and financing, extended-term channel financing ranging from 60 to 180 days and the Cisco Refresh pre-owned equipment business, has pioneered a quasi-consumption financing model called Open Pay, which helps customers buy and run on-premises data-centre hardware and software in a private cloud with some of the public cloud's pay-as-you-go flexibility.
"Open Pay is a way of Cisco being able to provide a cloud-like experience for customers that want to own, or already have secure assets on their own premises," Handworker says. "They have a public cloud-type experience within their own data centre."
Looking at the specifics of the model - which is currently available in the UK, France and Germany, and includes non-Cisco assets - clients fund 70% of the asset value and Cisco Capital funds 30%. Clients pay back Cisco Capital depending on the amount of assets it uses. This is the pay-as-you-go element where Cisco Capital remotely monitors use in the same way that a smart meter reads electricity consumption.
With Cisco Capital covering 30% of the cost of the assets until use reaches a certain level, Handworker describes Open Pay as a risk-sharing asset-finance solution that is particularly suited to companies entering new markets or providing services for the first time. "Cisco will help you understand trends and risks within your business, but actually help reduce that risk, which will bring you comfort moving forward," Handworker says.
The Open Pay solution suits companies across all industries, especially those that expect or predict spikes due to seasonal demand or rapid uptake due to the popularity of the product or service. Handworker says: "The types of organisations that would use the solution are wide ranging. Open Pay is not about catering to a particular type of organisation; it is more about helping an organisation understand the value it will give to their business.
"Whether you're a telecoms service provider offering a new service to the market, a manufacturer expecting spikes or troughs when producing products, a pharmaceutical organisation researching and producing new drugs, or an oil and gas company servicing users in remote locations to draw schematics on an oil rig, then Open Pay is for you. If you are not 100% certain of when and how that use is going to occur, Open Pay is the right solution for you."
The CFO's changing role
Open Pay, Handworker says, reflects the changing role of the decision-maker that is ultimately responsible for asset finance - the CFO. Traditional off-balance sheets and leasing vehicles are making way for a modern approach that takes into account business needs, current and projected business activity and stakeholder relationships - between finance and IT.
Focusing on customers' needs and aligning these with financing options such as Open Pay help separate Cisco Capital from traditional lenders, Handworker says. Supporting a business and its assets with operational capability is a key part of its value proposition.
"It's not about lending cheap money and going out to the market to try to compete with banking rates," Handworker says. "It's actually about ensuring that our customers' lifecycle management of their solutions is refreshed and that it is up to date. Cisco Capital helps to guard companies against technology obsolescence and gives them their requirements and platforms to be able to do business in the future. Cisco Capital can take assets, offer residual value risk on assets, refresh assets and take risk share on solutions that organisations are taking to the market. That's the value proposition that Cisco takes when it talks to its customers and partner organisations."
Digital services continue to integrate with existing technology and processes. Handworker, who will feature on the upcoming episode of FDE TV on YouTube, says: "Digital for me means enabling a company to play within the markets that it perceives as having value. It means enabling a company to offer consumers a wide range of solutions. In today's market, technology is a massive driver of that."