HPE pledges $2B in customer financing as Covid-19 impacts cash flow

Hewlett Packard Enterprise (HPE) has designated more than US$2 billion in financing to help customers overcome cash flow and liquidity challenges related to Covid-19, forming part of a global stimulus package.

Delivered through the vendor’s financial services division – HPE Financial Services – the Payment Relief Program is designed to help customers acquire new technology while alleviating financial strain, through deferred payment plans and buy-back initiatives.

The move comes amid rising concern within the channel across Asia Pacific that financially challenged customers continue to severely impact the ecosystem. As revealed via a special report – Protecting partners during Covid-19 – tier-2 providers are especially at risk as end-users struggle to meet payment terms, placing enormous strain on the supply chain.

“We are all seeing the global impact of the Covid-19 pandemic grow each day,” said Antonio Neri, president and CEO of HPE. “We are doing everything we can to address the needs and concerns of our customers and partners.”

According to Neri, the vendor is “actively working” to mitigate such impact from an operational perspective, with a particular focus on streamlining distribution through the channel.

“Long before Covid-19, we took steps to diversify our supply chain and we are working closely with more than 200 suppliers to optimise how we build and distribute our products,” Neri added. “Our response framework focuses on assessing developments, addressing the needs of our people and business operations, and adapting our business activities to help the world tackle this crisis.”

Specifically, the multibillion-dollar pledge in financing will be applied to ensure the continuity of business operations at customer level, in addition to “converting IT infrastructure into new sources of capital”.

Customers can also acquire new technology and pay one per cent of the total contract value each month for the first eight months, deferring over 90 per cent of the cost until 2021. According to HPE, beginning in 2021, each monthly payment would equal approximately 3.3 per cent of total contract value.

“This is a challenging time to lead a business,” added Irv Rothman, president and CEO of HPE Financial Services. “Today more than ever, IT leaders and CFOs play a central role in ensuring financial health while continuing operations.”

Rothman said customers can generate cash from existing assets through converting existing, owned IT assets into capital that can be applied to purchase new, upgraded technology.

HPE can also buy back excess newer generation technology that is no longer required. Over the last two years, the vendor has infused more than $642 million back into clients’ budgets this way, Rothman added.

Furthermore, the technology giant is also enabling a 90-day delayed payment structure to help ease customer budget constraints, available on new technology purchases and eligible for a range of hardware and select software, software appliances, services and installation packages.

Other incentives include a phased deployment program that allows customers to acquire compute and storage capacity with the flexibility to “configure, test and stand up” systems before paying, backed by certified pre-owned HPE technology which comes with a standard 30-day warranty and is eligible for additional maintenance and support.

This is in addition to short-term rental plans, allowing customers to rent pre-owned HPE technology from 3-12 months, alongside new PCs for 12 months. Rothman said such technology is factory-configured to customer specifications, available with warranty and eligible for HPE Pointnext Services support.

“At HPE Financial Services, we are committed to helping businesses align their priorities from an IT economics perspective and provide them with concrete solutions so they can move forward,” he added.

In assessing the market, Susan Middleton – research director at IDC – observed that many businesses today have an immediate need to preserve cash flow, defer or reduce expenses, alongside relieving capacity strains and delivery delays.

“During this crisis, businesses need help regardless of size of company or industry vertical,” Middleton explained. “IDC recommends that organisations focus on two immediate needs: conserving capital and utilising flexible payment options like leasing or as-a-service to meet urgent capacity requirement with limited financial impact.

“By dedicating $2 billion in financing and leveraging its broad portfolio of flexible payment solutions, HPE Financial Services will help business leaders navigate through the impact of Covid-19 on their markets.”

The sobering impact of Covid-19 on the technology market in Asia Pacific is only starting to be realised as changing customer priorities and reduced investments place increased pressure on the channel.

With economic activities hampered at regional levels – due to lockdown measures in the Philippines, India and Australia among other nations – organisations are reassessing priorities as business continuity plans kick into gear.

The substantial shift in market dynamics has prompted IDC to revise its IT spending forecast for Asia Pacific (excluding Japan and China) in 2020, significantly dropping to 1.2 per cent growth compared to original projections of 5.2 per cent growth in January.

According to the analyst firm, the market was expected to be buoyed by increased hardware, software and services spending on infrastructure as enterprise customers implement digital transformation projects. However, early indicators from the first quarter now show a different scenario playing out in region.

“Some of the biggest impacts we have seen as a result of Covid-19 are the changing demands on technologies, processes and mindset as they relate to work-from-home (WFH) mandates and supply chain disruptions,” observed Sandra Ng, group vice president of Asia Pacific at IDC.

“Not all organisations have the culture or the experience in enabling a WFH workforce. Even for organisations in the tech industry, the increased capacity load on network, cloud and other technologies is unprecedented.

“Based on the latest data of our Future of Work Employee Survey 2020, in countries like Singapore, India, Hong Kong and Australia and New Zealand where considerable organisations provide WFH, we have already seen an uptake of video meetings, audio conference calls, and collaboration platforms as a result of rethinking work.”