Changes in IT spending patterns in 2020 didn’t dampen the overall performance of the IT sector, but did change vendor behavior in certain categories. Reprioritization of customers’ IT budgets meant greater scrutiny of spend. One area where NPI noticed an increase in analysis of spend was networking and network security hardware and software, for both new investments and the pursuit of creative ways to decrease or push off maintenance spend.
One vendor that noticed this and embraced flexibility in the structuring of networking and network security hardware and software purchases was Cisco. As we helped our clients optimize IT spend, NPI observed an uptick in Cisco’s extension of financing alternatives as well as increased emphasis on streamlining support levels. Additionally, in exchange for new agreements or agreement extensions, Cisco allowed customers to put off initial payments for some period of time. NPI saw similar behavior from Arista and Juniper.
Other vendors chose different approaches. Palo Alto Networks, for instance, appeared to continue business as usual with a focus on locking customers into long term agreements that included much larger swaths of its portfolio. However, the company did give customers the opportunity to make annual payments during a multi-year term, a departure from the pressure PANW typically puts on customers to pay for the entire multi-year term up front. Regardless, the events of 2020 did little to get in the way of the company’s objective to fully extend their footprint across the enterprise and lock customers into three-year agreements. Check Point seems to be following a similar playbook.
IT financing companies also responded. HPE’s finance arm, HPEFS, created several financing vehicles to help organizations with immediate infrastructure and remote access needs . DFS (Dell Financial Services) also stepped up to the plate. Both companies offered their customers the ability to delay or defer payment and with very attractive – sometimes 0% – financing rates.
On the software side, we saw many security solution vendors offer significant financing incentives in exchange for longer term commitments – another example of a 180-degree swing from traditional cash-up-front models.
Outlook for Financial Incentives for Network Security Hardware and Software
Will the creative financing we saw in 2020 last throughout 2021? As we approach mid-year, NPI is still seeing flexibility with many networking and network security hardware and software vendors, and we expect this trend to continue throughout the year for a couple of reasons.
First, while some industries have bounced back from the pandemic, others are recovering more slowly. In many cases, these organizations are juggling mission-critical IT projects and financial challenges.
That brings us to reason number two. Some vendors (although not all) are hesitant to simply turn off the faucet on financial creativity. There is too much long-term customer value at stake. The compassion exhibited by vendors is a long game and the prize is greater customer loyalty and lock-in.
NPI’s recommendation is to approach vendors early and often to take advantage of continued generosity – particularly if you are rolling out large-scale transformation projects or infrastructure upgrades that require new investment in networking, network security hardware and software. This can be especially beneficial for hardware. In addition to delaying maintenance payments, you can likely sell old hardware on the secondary market to make a little money back on your prior investment. Your hardware vendor may even offer you a percentage off the purchase to take that equipment out of circulation.
The bottom line is this – there is still time to embrace the financial creativity vendors are serving up. Proceed with caution, of course, but don’t get left behind. The flexibility you secure now can help you accelerate crucial IT projects and calibrate expectations for flexible terms moving forward.
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