Negotiating Telecom? Waiting Can Be Costly
PINEHURST, N.C., Sept. 23, 2017 : Recently I've spoken with several executives who've stated that they aren't going to be negotiating their telecommunications agreements in the near term because they are in the process of transformation. This is alarming because it translates to a large opportunity cost and smacks of carrier rhetoric.The reality is, whether your transformation consists of a migration to SD-WAN, converged communications, or the implementation of a broadband network, the completion takes longer than forecasted. And this translates to a substantial loss of savings. The opportunity cost associated with embedded services is added to the opportunity cost associated with not competitively sourcing or benchmarking the future technology. The good news is there are ways to leverage fresh market pricing.
The most common reason given for delaying negotiations during a transformation is that the final network design has not been determined and revenue-commitment costs are uncertain. Remedy: Estimate a low commitment percentage, below 75% of your conservative projected spend post-migration, and move forward with negotiations without introducing risk to your organization. (http://www.g2inc.com/insights/)
In addition, there are several other contractual protections you can use to pursue your transformation objectives without being hampered by obligations to your carrier.
1.Adjust Individual Circuit Term Commitments: Limit individual circuit terms to twelve months and make sure there is no liability if you decide to cancel after the first twelve months.
2.Address Technology and Downturn Protections: Standard language must be redlined so that business downturns don't need to be "beyond Customer's control" and new technologies don't have to be services that didn't exist at the time the Agreement was signed nor should they have to "materially improve Customer's services or applications".
The bottom line is that there isn't any situation that warrants a "cease and desist" on negotiations for telecommunications services. If your company is considering any form of network transformation or change there is still the potential for substantial savings today while also future-proofing for the flexibility needed down the road.