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Five Key Steps in Negotiating Telecom Contracts

Posted on: July 18, 2014

The European Union has given a gift to travelers this summer by slashing mobile data roaming fees by 55 percentwhile traveling across the 28-nation bloc. UK mobile operator Three has removed some roaming charges altogether in 16 “Feel At Home” countries, including France, Italy, Austria, and the U.S., where travelers can call or text UK numbers and surf the web using their home allowances with no extra roaming charges. This is all part of the European Union’s mission to abolish roaming fees completely by 2016.

While we commend progressive carriers like Three and the EU’s efforts–there’s no doubt they will shift the tide by leading by example–roaming and cost issues on fixed and mobile lines are still alive and well within the enterprise, due mostly to the daunting process of negotiating carrier contracts. Bottom line: it’s complex and leaves little room for error even for the most experienced negotiator. And while many of these can easily apply to your mobile contract negotiations process, it’s important to remember your company’s bread and butter costs–fixed communications–especially as they are tied in many cases. To help navigate these complicated waters, here are five key telecom contract negotiating tips that can help you achieve the greatest financial sav­ings while minimizing risk:

Step 1: Develop an Inventory – You won’t know what to buy if you don’t know what you own. There are several tools you can utilize to understand your requirements, including leveraging invoices or contract compliance reports from your provider. Another low-risk, low-cost solution is to have a services audit performed by a third-party vendor. To gain visibility into local services, have a CLEC or reseller compete against the incumbent for the business, therefore providing access to invoice and inventory reports.

Step 2: Decide on a Strategy – It is important to ensure your team agrees on one strategy before beginning the negotiations process, and the first step is to identify the objectives. Beyond reducing costs, there might be additional target areas, such as increasing efficiencies in the management of providers, account support, reporting, or billing. Having this strategy will help determine whether your current provider can do the job or if you need to engage in an RFP. A fun fact to keep in mind: more than 80 percent of RFPs go to incumbents, based on the advantage that the current provider has in delivering savings more quickly.

Step 3: Present Requirements or Issue an RFP – Selecting the right bidders is critical and I encourage you to look beyond tier-one suppliers. Every RFP should include requirements for terms and conditions, including commitment levels. This provides a holistic view of the deal in order to preserve your rights around service support and billing while minimizing risk. You can also speed the process by requiring draft agreements to be submitted along with the initial RFP.
Also, renegotiations require you to prepare a detailed demand set, which enables you to compare proposed commitment levels to your run rate.

Step 4: Analyze Offers and Address Deficiencies – Both RFPs and renegotiations must be analyzed once the offers come in. Renegotia­tion responses should be compared to the current provider’s numbers, and you should look for anomalies in RFP responses. Then it’s time to identify deficiencies or gaps by reviewing the first-round financials and terms and conditions. Requirements should be communicated back to the providers in writing.

Step 5: Go to Contract – The last step is to request final contract pages. Allow two weeks after an initial request to fix any errors in the contract. If disagreements over particular clauses stall the deal, reach out to a third party for advice.

While there clearly is much more to negotiating telecommunications agreements–or any kind of contract, for that matter–than these five simple steps, by following this advice you can better prepare to move more expeditiously through the complex negotiations pro­cess.

For those planning a big trip abroad this summer check out the best carrier deals here and stay tuned for our next blog on how your company can safeguard against bill shock!

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