Best bang for your buck: How to negotiate telecom contracts
The enterprise telecom services procurement process unfolds with ease after the conclusion of the request for proposal phase, right? This, unfortunately, is not the case. An equally complex exercise follows: telecom contract negotiation. Here, businesses tussle with telecom service providers to get the right products for the right prices. Sadly, few organizations claim victory in these contractual showdowns, as evidenced by the fact that most overpay for their enterprise communication infrastructure, according to research from Gartner. That said, companies that reach the negotiation stage are not doomed to blow their budgets. By simply gaining an understanding of telecom contract mediation best practices and common pain points, firms can come out of contract negotiations on top.
Understanding telecom contract negotiation best practices
There are numerous strategies businesses can leverage when dealing with telecom service providers. These tried-and-true techniques include:
- Beginning negotiation early: Telecom procurement norms seem to suggest that companies should wait until the RFP process has concluded before delving into the legalese. While this approach is common, it is anything but optimal. Organizations should ideally begin negotiating as they receive and review RFP responses. Why? It lends them an edge, as they can dictate service-level agreement terms with multiple vendors in the running. In this situation, service providers have no choice but to offer competitive packages and pricing for fear of losing out to competitors. Conversely, enterprises that hold off on discussing contractual items until they have chosen vendors often find themselves taking what they can get, having unwittingly relinquished their leverage.
- Dominating the RFP process: In theory, businesses should have the upper hand during the RFP process by virtue of its structure. However, telecom service providers often attempt to hijack the proceedings by refusing to adhere to formatting guidelines, making it difficult to effectively compare costs and service specifications. Some use this strategy to omit projected expenses entirely or skew estimated service levels to present inaccurate pricing. Companies must, therefore, enforce strict submission standards to keep vendors in line and gain the information they need to start contract negotiations in a strong position.
- Focusing on granular terms: SLA review is among the most important procurement functions. Yet, a good number of organizations blow through this process, missing small contractual terms that have an immense impact on telecom service quality and cost. For example, some businesses sign SLAs with numerous minimum-volume requirements and then find themselves paying additional fees because they do not hit the contracted usage thresholds. Others neglect to pursue service-level guarantees with associated credit-based reimbursement models or insert downturn clauses that can kick in when the market tightens. By paying close attention to all the items included in SLAs, enterprises can gain ground during contract negotiations and ultimately get the services they need within acceptable budgetary bounds.
In the end, these methodologies can empower organizations haggling with vendors and help them achieve their goals.
Unpacking contractual sticking points
Even businesses with skilled, detail-oriented procurement teams using proven negotiation best practices encounter difficulties when dealing with telecom vendors. There is a common reason for this: thorny contractual terms. There are a number of SLA components that catalyze conflict between organizations and telecom service providers. These include:
- Indemnification clauses: These items make vendors liable for warranty breaches and any resulting legal action brought by third-parties. In telecom SLAs, indemnification clauses always benefit organizations signing up for services, which is why many providers omit them from proposed contracts and fight hard to leave these components out altogether or limit their scopes.
- Exit clauses: Sometimes circumstances arise that necessitate client-side contract termination. Exit clauses facilitate this kind of abrupt SLA egris, while protecting businesses from incurring early termination charges. Again, these items are virtually always one-sided, meaning telecom providers often do all they can to avoid exit clauses or tack on as many conditions as possible.
- Service provider performance metrics: The average SLA contains numerous vendor performance metrics, from overarching up-time requirements to packet-loss minimums. However, just because these items are present, does not mean their associated conditions are beneficial. Organizations must devote serious effort to ensuring these measures hold vendors accountable.
Companies must keep these contractual variables in mind during the negotiation process and come prepared to jockey for position.
Gaining the upper hand with Teligistics
While telecom contract negotiation best practices and legal insight can certainly empower businesses bolstering their communications infrastructure through third-party services, this knowledge alone cannot optimize costs or lay the foundation for operational success. Organizations need something more to level the playing field, and telecom sourcing technology is the answer. These platforms allow companies of all sizes to effectively assess their hardware and software needs and easily manage the RFP and negotiation processes from positions of strength.
Here at Teligistics, we offer an innovative sourcing solution that does just that. The product, called Telibid, offers access to proposal management tools that keep vendors honest and accelerate procurement. The platform includes a number of proprietary components that separate it from comparable products. These features include:
- Customizable, user-friendly RFP templates for typical telecom services such as local dial tone, long distance, internet, wireless, MPLS, Managed Services, SIP trunking and VoIP.
- Sophisticated financial analysis tools that enable users to easily compare service offerings and pricing structures for multiple telecom carriers.
- An SOX-compliant Telecom Decision Matrix™ that uses input from internal stakeholders to establish audit trails and justification for vendor contract awards.
- Rapid Deploy™ RFP capabilities for clients looking to avoid the standard-length RFP process and complete projects at an accelerated rate.
- Real-time tracking of vendor progress and rate entries.
Together, these components make Telibid an ideal asset for business navigating the telecom contract negotiation process. Is your organization interested in learning more about Telibid or our telecom expense and asset management and enterprise mobility management technologies? Connect with us today to schedule a demo and learn how our solutions generate real return on investment.