April 6, 2016

Arrow Capital cloud financing helps you pivot to annuity

Margins and markets are up – what’s the problem?

According to IDC, cloud partners with over 50% cloud revenue have 1.5 times the gross profit percentage versus other non-cloud partners. Over the next five years, spending on cloud-based big data and analytics solutions will grow three times faster than spending for on-premises solutions. Hybrid and on/off premises deployments will become a requirement.

As you move to a cloud business to take advantage of this market, you will no doubt have some financing challenges in front of you. Cloud engagements are transacted differently from the traditional buy or lease programs where partners get their revenue upfront. With cloud, partners are paid based upon end-user usage, called an annuity stream. It may take many customers to build an annuity stream that compensates for the former upfront revenue.

This may be easier said than done. Your financial model must be able to generate enough cash to float your business until the monthly annuity payment stream delivers enough cash flow to run your business. And, you must be able to compensate your sales team through the transaction. In many cases, this means paying your sales teams up front on a contract-value basis versus a billing basis.

Cloud financing programs help bridge the gap
With Arrow Capital Solutions, we can help you solve your cash flow challenges as you move to an annuity- based revenue stream – all while incenting your sales team to close more deals. We will help you accelerate your cash flow, enabling you to create a compensation plan that is relevant to your sales team during the transition from traditional hardware or software sales to a cloud annuity payment stream. We can also help you with the operational challenges of monthly billing by providing partner label consolidated billing solutions.

“An annuity-based revenue stream can put a financial strain on your business until you build up your customer base,” said Wayne Peters, Arrow North American Senior Director, Financial Programs. “With Arrow’s flexible financing programs, we can help ease this transition and alleviate your cash flow and compensation challenges – thus allowing you to take advantage of emerging cloud market opportunities.”

Arrow offers four financing programs to help you build your cloud business:

1. Data Center Financing

Managed Services Financing allows Arrow Capital Solutions to credit approve the solution based upon your end-customer. We take a blind assignment of your Managed Services Agreement and then bill and collect from the customer for you. In some cases, you may be able to retain the billing and collecting part of the process.

Consumption-Based Financing is done through the Arrow FLEXPricing progam and is a consumption-based model with an elasticity component. This vendor-agnostic solution is tailor-made for the data center and can accommodate private, public or hybrid cloud scenarios. This solution can be written with channel partners, including VARs, hybrid VARs and Managed Services Providers or their end-users, and delivers upfront cash flow and revenue recognition of the entire solution for both the partner and vendor.

2. Software Subscription Financing 

Arrow Capital Solutions will fund the entire term of your subscription agreement, as well handle all the back-office billing and collecting. A blind assignment of your subscription agreement may be required.

3. Buy Back/Cash Forward Program

Arrow will purchase your existing data center equipment and transfer it to a payment plan. You will retain possession of the equipment throughout the term and, depending on the arrangement, you can upgrade or own the equipment at the end of the term.

4. Partner Label Program 

This program is a simple agreement between you and Arrow that allow us to use your branding to deliver contracts, as well as bill and collect in your name.

Contact Us
In summary, Arrow Capital Solutions offers several cloud financing plans to help you pivot to an annuity revenue stream. All financial solutions require credit approval of the end customer. The customer may be the solution provider, Managed Services Provider, vendor or end user.

If you would like additional information of the plans, please contact Tim Bertrand (West) at tbertrand@arrow.com or Scott Riley (East) at sriley@arrow.com.

Editor’s Note: This post was originally published in January 2016 and has been updated for accuracy and comprehensiveness.