June 7, 2011 8:00 AM

Because telecom costs represent a significant investment for a global organization, effective negotiation of telco/service/product contracts is imperative.

But it’s not enough to “play hardball” and threaten to terminate a contract and find new partners if your terms aren’t met.  You need to use knowledge of mature and emerging technologies, market-based price and service standards, and contract terms and conditions to define goals and manage vendor performance.

Some do’s and don’ts:

• Do include contractual provision for annual benchmarks to ensure that rates stay aligned with rapidly evolving market conditions, as well as your changing business requirements.
• Do enhance flexibility by demanding a low, or no annual commitment.
• Do be aware of market standards regarding pricing structures for basic product and service elements, as well as for those less obvious “administrative” charges that seem to appear on invoices.
• Don’t allow published tariffs to be used as the basis of negotiations. They are misleading, since they don’t include the credits, bonuses, and forbearance that typically characterize any large telecom agreement.
• Don’t allow the contract to include prices for services that you don’t use.  Since you have no incentive to negotiate prices for such services, you’ll be at a disadvantage if you need them in the future.

If you follow these and other guidelines and still don’t get what you need, then you have to be prepared to pull the trigger and issue an RFP for new services.

But how do you know when you've crossed the line from a salvageable relationship to a lost cause? "Make the Call," a Compass white paper on telecom negotiation strategies, outlines the basics of renegotiating an agreement with an incumbent service provider, and, if that renegotiation fails, how to go about finding new providers and implementing a smooth transition.

Originally posted by John Lytle, Consulting Director, Compass, on Consider the Source

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TPI is the leader in guiding organizations through effective, lasting transformation of their business support operations. Around the globe we have helped hundreds of clients reduce operating risks, streamline complex operations, improve the cost of support functions, achieve sustainable improvements and make competitive gains. Decisions to change and successful transition of existing operations to new service delivery models is hard — and replete with risks. While the decisions are never formulaic, the hard-earned lessons of hundreds of prior evaluations are invaluable.

Posted by Sue Ansell at June 7, 2011 8:00 AM

Categories: Outsourcing

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