If you're borrowing from your vendor, you can't afford it

Enterprises that want to borrow money from their vendor to buy overpriced software are in for a shock.

TechDirt tries to put a pretty face on vendor-financed software/hardware deals, but let's be clear: if you have to borrow from the vendor that is overpricing its software (or hardware) in the first place , you can't afford to buy it. If you can't afford to buy software (or hardware) with cash or bank financing, you can't afford to buy software.

I'm not sure why this is complicated for some. The last organization you want to borrow from to buy software is your software vendor. This lets the vendor completely control your destiny, not to mention the fact that it creates serious conflicts of interest for the vendor (e.g., it can charge maximum price since it is financing the deal). This is the sort of muddled thinking that put the global economy in the toilet in the first place.

Valleywag is right to call out that such arrangements usually end badly for technology shareholders. Defaults on loans are a fact of life, whether for bank loans or vendor loans. The difference is that vendors have to not only back out of bad loans, but also the revenue.

I have a better idea: spend less on IT. Buy open source.

Tech Culture
About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.


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