All economic attention has been going to the Mortgage, Banking, Retail and Auto sectors but the IT sector is also getting slammed as well.  In an attempt to hold of major collapse in the IT industry  suppliers are pulling at page out the Auto Industry play book – 0% financing for up to 36 months.

Back in 2002 when GM had 0% financing the trick actually worked quite well across all GM lines.  I knew two Cadillac sales people who both ended up making over 250K each that year due to high sales (for comparison, their yearly average was 100K). So can the IT industry spur buyers into purchasing enterprise hardware and software by offering 0% financing?  

Actually, the real question comes down to how many companies need to buy new solutions? 

There are a few industries that will need to purchase solutions no matter what – Insurance, Communications – but the purchases will simply be to keep business running as usual.  No one, no industry, MUST go out and implement new solutions at this point because no industry needs to.  

So the initial guess would be that, no, 0% financing will not really spur sales. But let’s say that the 0% offer actually does cause an increase in corporate spending on IT projects, how long could the upside possibly last?  

When GM returned to the 0% approach in 2008 it was nowhere as successful as the first time.  Why?  First off, everyone who needed a car purchased one within the last 4 years during the last round of 0% financing, and second, there was no consumer need. Even if the 0% works in this round, buyers will continue to expect low(er) cost moving forward, which means vendors may get into a cycle of low returns moving forwards.

It’s a dangerous game.

Related posts:

1. Ford CEO Sees No Auto Recovery Until 2010, Bankruptcy "is not in our consideration"
2. Chrysler to idle all factories for at least a month
3. Car Czar to dictate prices and production – Ending the illusion that the United States is a free market
4. GM bondholders nix tender offer
5. December Auto sales are miserable, and we knew this, but the surprise of the pack was Chrysler