Your Company Telecom Contract Is Ending Soon. What to do? ⋆

Your Company Telecom Contract Is Ending Soon. What to do?

A well-negotiated telecom services contract is one that defines all appropriate services clearly and completely.

Telecom carriers have developed a new corporate mindset and are changing the ways they do business in order to maximize profits.

Enterprise customers that have large or multiple contracts with these carriers need to be aware of three emerging trends that are impacting the contract negotiation process:

1) technology changes;

2) changing mobile plan structures and equipment purchasing options; and

3) a drive for efficiency in contracts and billing platforms.

Knowledge is also a key component of maintaining the right leverage. This means understanding exactly what you use with the vendor, what it is costing you today and what it should be costing you in your new agreement. As a general rule, telecom pricing is declining across a broad spectrum of services, and the gap between leading-edge pricing and average pricing in the market remains wide (see chart below). Additionally, a strong rate in one category doesn’t mean you have good rates across the board. You must understand the gap to market in each and every area of your spending.

When it comes to carrier negotiations, the process can be lengthy and frustrating. Part of it is due to the process the carriers have implemented around contracts and renewals. The customer’s day-to-day contact, the carrier account team, has little authority when it comes to the pricing provided. That authority comes from the contracts and pricing organization. While your account team works with pricing, each team and each member may have a very different perspective on the negotiation process.

For the carrier account team, it means keeping the customer generally happy in order to keep revenues as high as possible – a difficult task in a market where competition and technology drive down pricing. The pricing and contracts groups have somewhat different motivations. They are primarily focused on margins and price points – ensuring that the deal is generally good for the carrier, ensuring that the approved pricing is as high as possible and doesn’t go below levels previously established. Keep this in mind as you negotiate and, where possible, bring the contracts and pricing group into the process.

5 Common Mistakes Made When Negotiating Telecom Contract

Locking in too long – It might be tempting to agree to an extremely long contract to save costs. Often, the carrier will give you a better deal if you agree to a 5-10 year contract instead of the more reasonable 3 years or less contract. Don’t give in to temptation – technology improves every year, and the amount of money needed to deliver on a service can decrease. Negotiating annually can allow you to adjust SLAs and key contract terms, and get your team access to new devices for less money.

Not having an “out” clause – The out clause is powerful and serves the best interest of the company, so the carrier is going to work hard to ensure the terms are in their favor. Paying a penalty for opting out early can be extremely costly, making it important to have terms that allow for “termination without penalty.”

No flexibility that accommodates organizational changes – What if your company is part of an acquisition, and you’re responsible for absorbing devices and phone lines? There needs to be language in the contract that makes the merge seamless from a mobility perspective, as not being prepared can cause chaos and a huge loss of productivity.

Being stuck with incomprehensible billing – It is important to ensure that the monthly reporting is easy to understand and comfortable for you and your team to manage. While negotiating the agreement, it is the perfect time to ensure the details you require in reporting, with examples. Before the ink is dry on the agreement is time to set clear expectations.

SLA agreements that are not defined/in your favor – The Service Level Agreement (SLA) is designed to hold the carrier accountable. You need to make sure that the SLA in the contract is clear, and defined, and allows your team to get the support they need in a reasonable amount of time. This puts the burden on the carrier to deliver the services promised while providing clear expectations for both parties.

While you may think that the 10-percent pricing reduction your provider is offering you today sounds great, unless you get a benchmarking firm to provide you with current market benchmark data or go through the time and expense of an RFP, you could be missing out on much more savings.