In 2014 to 2015, oil prices took a beating, and it became clearthat they were not going to rise much in the short term. Companiesand government entities across the Middle East began pushing toextend payment terms on purchases, and the software sector was notexempt from this trend. “Cash flow was an issue with virtually allour customers,” says Rahul Daswani, senior manager in theStructured Finance group for Microsoft's Worldwide PaymentSolutions division. “Our public-sector customers were adjusting tothe new realities of their own budgets, so they were wanting longerpayment terms.”

Microsoft's business model in the Middle East involves licensingsales through local software integrators, and these companies weregetting squeezed. Microsoft didn't want to accept non-standardpayment terms from the software integrators because of the businesscomplexities that doing so would raise. Microsoft sets creditlimits, companywide, based on an analysis of customer financialsand uses various credit management solutions to mitigate thoserisks. However, this process is more difficult in the Middle Eastcompared with other parts of the world, because many Middle Eastmarkets are designated “high risk.”

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Meg Waters

Meg Waters is the editor in chief of Treasury & Risk. She is the former editor in chief of BPM Magazine and the former managing editor of Business Finance.