By changing the way solution providers approach financing options with customers, Extreme Networks believes it can reframe the entire partner-user dynamic.
With Extreme Capital Solutions, the San Jose, Calif., networking firm is taking a new approach to the way customers finance their purchases, as well as how partners get paid.
The system is an Opex-based model by which solution providers are paid cash as they would be in a traditional deal and Extreme Networks works with its distributors to treat the transaction like a subscription. The transactions are on a rolling 60-day term, meaning customers can make changes to their networking infrastructure from access points to the core of the data center with nothing more than 60 days' notice.
Customers like the program, said Lisa Paquette-Nelson, senior director of Extreme Capital Solutions. A full 92 percent of customers using the program are net-new, she said, and 83 percent come back for secondary deployments within six months.
"Not even another finance company or bank has this," said Mark Moretti, vice president of infrastructure and security at Carousel Industries, an Exeter, R.I., solution provider that works with Extreme Networks. "It's a bold move. "Everybody says they have a flexible purchasing program, but they're all contract-based. You're signing a fixed-term agreement. They're setting a dial that you can't go below. You're still paying, and it's still a termed commitment with a penalty for getting out early."
Conversely, Extreme Capital's latest offering allows for the kind of flexibility customers have been demanding for years, Moretti said.
"People want to only pay for what they're using," Moretti said. "When dorms are not occupied, the college doesn't want to pay for those switches' utilization. Because this is on a subscription, if you need to upgrade on the fly you can move piece-parts in and out of that solution. There are no upgrade or downgrade minimums. It flexes with the ebb and flow of the environment.
"When we sell a solution, it gets treated just like cash," Moretti said. "The distributor works with Extreme to turn that into a subscription model, but we treat it like a regular transaction. We keep the proceeds. It's a complete 100 percent risk for Extreme."
Moretti said Carousel does about $10 million annually with Extreme Networks and expects to double that. "We think there's tremendous upside. We think we can double the numbers, and I think that is fairly conservative. They're so aggressive and so bold, people are going to pay attention to that."
Paquette-Nelson said the new financing models are an acknowledgement of changing dynamics in the IT purchasing landscape.
"Buying decisions have changed," Paquette-Nelson said. "It's no longer truly held by the technical buyer -- about 80 percent of the time it's a joint decision between the technical buyer and the business buyer. With this model, if we ship 100 units and something in [the customer's] business changes, or they want to take advantage of a different product or service and want to swap out 20, they can do that without any penalty. We'll ship new product and adjust payments. It's a fully flexible model."