No one really, given the market sentiments after the global credit squeeze. But Cisco Capital begs to differ, finds out 4Ps B&M’s Savreen Gadhoke
Of late, there has been an upsurge in the small and medium business (SMB) segment in the country. And riding this high tide in the sector are
the various IT companies. A study titled ‘IT opportunity in the SMB sector’ by Zinnov Management Consulting reports that this segment in India spent nearly $6.6 billion during 2007-08, which is 30% of the total expenditure on IT in India during the year. Indeed great news for the IT sector, but what about a time when funds are quickly drying up? Indeed, for the SMBs, it is getting difficult by the day to maintain the expenditures for keeping pace with speed at which technology is getting upgraded, reinvented and reinnovated! And that’s where Cisco Capital comes in, to help solve the financial problems that the SMBs are facing to buy/utilise latest in the field of technology. Cisco Capital is a wholly-owned subsidiary of Cisco Systems and therefore a captive financing arm of Cisco. It however also deals directly with high-end enterprises and high end customers. It was incorporated in 2005, with an initial corpus of $150 million. It is dedicated to providing financing solutions and options to Cisco’s channel partners and its customers. In an exclusive interview with 4Ps B&M, Gautam Munish, Country Manager, Cisco Capital, discloses how Cisco Capital helps organisations derive maximum from investments in technology...
Why does Cisco need a financial services arm at all?
Cisco Capital deals in finance... rather a centre point between technology and finance. Cisco has two kinds of options whereby they invest their money – through equity investments (Cisco Venture Capital) and Cisco Capital (which is asset-backed lending practice). Cisco Capital is more focused on the debt side. We are more of a sales enabling arm rather than an entity which is focused on bottomlines.
How do you differentiate yourself from a standalone financier?
A standalone financier primarily takes only credit risk. But we, apart from taking a credit risk, also take what you’d call ‘market risk’, which is nothing but us assuming genuine residual position in the kits that we are manufacturing. So what we are offering are called Fair Market Value (FMV) leases, whereby companies who sign-on FMV leases significantly lower their total cost of ownership and also protect themselves from likely technology obsolescence issues. So if you look at the two paradigms of making any asset investment, you are firstly bothered about whether this asset will last you for the defined economic life that you have in mind. And secondly, it will help you to keep your total cost of ownership under control. Through the Cisco Capital involvement, by just getting an insurance cover on technology life cycle, they are also ensuring (because of the residual positions that we are assuming) that their total cost of ownership is also significantly lowered. These are the two tenets on which we distinguish ourselves from a standalone financier.
What are the main funding options that you provide to your channel partners & customers?
For our SMB customers, we run a special concessional scheme, whereby SMBs have the possibility of getting funding from us under our Easy Lease programmes at an interest rate of 7%. For the multi-year service contracts that Cisco offers, we also give our SMB customers funding at an interest rate of 0%. So with these options, we feel that we’ve hit the right places in the market places as far as SMBs are concerned.
Keeping in mind the original line of business of Cisco, how are Cisco Capital and the parent company finding symbiotic synergy?
By virtue of us knowing what the typical life span of technology looks like, the minute we start educating a customer, they see us more as business advisors rather than box-sellers. We are the ones who are holding the credit risk, market risk, interest rate risk and the asset risk. At the end of the day, the client also feels that he is the one who is getting all the benefits. He stops looking at us merely as vendors and takes us as business partners. So that is how we get more aligned to the practices that Cisco follows as an organisation. And because we are aligned, we share the same vision. We can educate the customer a lot better and be seen as the right kind of business advisor in the market place.
What is the total size of Cisco Capital in terms of business volume?
That’s something that we typically don’t comment on. But just to give you an idea – we have a CAGR of 80%. But we expect this to obviously slowdown because the base is getting to grow...
Are you planning to launch more funding options soon?
We realise that the advanced technology that we sell, has a longer deployment cycle as compared to foundation technologies. But an issue that our partners are experiencing is that while they need to pay Cisco for the purchase that they are making from us, they are being pushed back in realising their payments from their end customers. So we are coming out with a solution that will help our partners bridge that gap.
Cisco Capital, 2010! What will it be?
We have 14.5% penetration in the parent organisation and we expect this to move up by several percentage points by 2010. We will ensure not just business growth but also that per employee productivity rises. We see ourselves as a truly global financial services organisation and I can only see it getting better. As our businesses expand, as our portfolio gets to be bigger, how we monitor our bigger portfolio, how we stay on top of all the asset migration that our customers will end up opting for, how we will manage the entire life cycle of the asset for them – we feel that we will be in for a long haul, and we will be seen as a credible set up not just for now but for times to come.
Your experience with Cisco Capital...
I was the first person to join when Cisco Capital was formed. The entity was not even in existence though we had got the registration done. So I’ve seen Cisco capital through the last three and a half years from being a non-existent organisation to a feasible sized entity today. I’ve worked with big brands in the financial services. While those were very good, I think that this is a semi-entrepreneurial kind of a venture that has really tested my abilities. My experience with Cisco Capital has been extremely fulfilling.
Of late, there has been an upsurge in the small and medium business (SMB) segment in the country. And riding this high tide in the sector are
the various IT companies. A study titled ‘IT opportunity in the SMB sector’ by Zinnov Management Consulting reports that this segment in India spent nearly $6.6 billion during 2007-08, which is 30% of the total expenditure on IT in India during the year. Indeed great news for the IT sector, but what about a time when funds are quickly drying up? Indeed, for the SMBs, it is getting difficult by the day to maintain the expenditures for keeping pace with speed at which technology is getting upgraded, reinvented and reinnovated! And that’s where Cisco Capital comes in, to help solve the financial problems that the SMBs are facing to buy/utilise latest in the field of technology. Cisco Capital is a wholly-owned subsidiary of Cisco Systems and therefore a captive financing arm of Cisco. It however also deals directly with high-end enterprises and high end customers. It was incorporated in 2005, with an initial corpus of $150 million. It is dedicated to providing financing solutions and options to Cisco’s channel partners and its customers. In an exclusive interview with 4Ps B&M, Gautam Munish, Country Manager, Cisco Capital, discloses how Cisco Capital helps organisations derive maximum from investments in technology...Why does Cisco need a financial services arm at all?
Cisco Capital deals in finance... rather a centre point between technology and finance. Cisco has two kinds of options whereby they invest their money – through equity investments (Cisco Venture Capital) and Cisco Capital (which is asset-backed lending practice). Cisco Capital is more focused on the debt side. We are more of a sales enabling arm rather than an entity which is focused on bottomlines.
How do you differentiate yourself from a standalone financier?
A standalone financier primarily takes only credit risk. But we, apart from taking a credit risk, also take what you’d call ‘market risk’, which is nothing but us assuming genuine residual position in the kits that we are manufacturing. So what we are offering are called Fair Market Value (FMV) leases, whereby companies who sign-on FMV leases significantly lower their total cost of ownership and also protect themselves from likely technology obsolescence issues. So if you look at the two paradigms of making any asset investment, you are firstly bothered about whether this asset will last you for the defined economic life that you have in mind. And secondly, it will help you to keep your total cost of ownership under control. Through the Cisco Capital involvement, by just getting an insurance cover on technology life cycle, they are also ensuring (because of the residual positions that we are assuming) that their total cost of ownership is also significantly lowered. These are the two tenets on which we distinguish ourselves from a standalone financier.
What are the main funding options that you provide to your channel partners & customers?
For our SMB customers, we run a special concessional scheme, whereby SMBs have the possibility of getting funding from us under our Easy Lease programmes at an interest rate of 7%. For the multi-year service contracts that Cisco offers, we also give our SMB customers funding at an interest rate of 0%. So with these options, we feel that we’ve hit the right places in the market places as far as SMBs are concerned.
Keeping in mind the original line of business of Cisco, how are Cisco Capital and the parent company finding symbiotic synergy?
By virtue of us knowing what the typical life span of technology looks like, the minute we start educating a customer, they see us more as business advisors rather than box-sellers. We are the ones who are holding the credit risk, market risk, interest rate risk and the asset risk. At the end of the day, the client also feels that he is the one who is getting all the benefits. He stops looking at us merely as vendors and takes us as business partners. So that is how we get more aligned to the practices that Cisco follows as an organisation. And because we are aligned, we share the same vision. We can educate the customer a lot better and be seen as the right kind of business advisor in the market place.
What is the total size of Cisco Capital in terms of business volume?
That’s something that we typically don’t comment on. But just to give you an idea – we have a CAGR of 80%. But we expect this to obviously slowdown because the base is getting to grow...
Are you planning to launch more funding options soon?
We realise that the advanced technology that we sell, has a longer deployment cycle as compared to foundation technologies. But an issue that our partners are experiencing is that while they need to pay Cisco for the purchase that they are making from us, they are being pushed back in realising their payments from their end customers. So we are coming out with a solution that will help our partners bridge that gap.
Cisco Capital, 2010! What will it be?
We have 14.5% penetration in the parent organisation and we expect this to move up by several percentage points by 2010. We will ensure not just business growth but also that per employee productivity rises. We see ourselves as a truly global financial services organisation and I can only see it getting better. As our businesses expand, as our portfolio gets to be bigger, how we monitor our bigger portfolio, how we stay on top of all the asset migration that our customers will end up opting for, how we will manage the entire life cycle of the asset for them – we feel that we will be in for a long haul, and we will be seen as a credible set up not just for now but for times to come.
Your experience with Cisco Capital...
I was the first person to join when Cisco Capital was formed. The entity was not even in existence though we had got the registration done. So I’ve seen Cisco capital through the last three and a half years from being a non-existent organisation to a feasible sized entity today. I’ve worked with big brands in the financial services. While those were very good, I think that this is a semi-entrepreneurial kind of a venture that has really tested my abilities. My experience with Cisco Capital has been extremely fulfilling.
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