At Valicom, we have been negotiating with vendors on our clients behalf for over 30 years. For any company, the art of negotiation is perfected over many years. Negotiation looks different from industry to industry and product to product but there are a few negotiation best practices that are the same across the board. This includes the industry of telecommunications. Let’s dip our fingers into the secret sauce of successful vendor negotiations.
What words come to mind when you think negotiation? Or vendor negotiation? We have a few to add that are not listed in the above graphic: scary, confusing, unfair.
When it comes to telecom vendor negotiation specifically, most companies don’t know what they don’t know. Finding hidden knowledge about your technology environment and what others are paying could mean the difference between starting a new program and overpaying on your technology bills once again.
Where do you find this hidden knowledge? We often recommend working with a telecom expense management company, but some deep digging could also do the trick.
Benchmarking
Benchmarking is an extremely helpful process for companies as they prepare for conversations with their telecom vendors, whether that is an in-person negotiation or through a request for proposal (RFP).
Benchmarking not only provides you with a clear picture of your providers price points, it also helps you make RFP savings estimates by service type. It’s good practice to write down the goals you have and how you envision your contact pricing to look like. Here’s what benchmarking would look like for these specific services:
LOCAL SERVICES
These LEC services, including POTS, PBX Trunks, DID Trunks, Centrex, PRI T-1, Point to Point T-1, Analog circuit, etc., are all benchmark dependant on location. With the local POTS, Trunks, and PRI’s you’ll be able to have a nice range within each state of what the pricing would look like on the low and high ends. Keep in mind that some circuits such as Point to Point T-1’s often have too many variables to get that detailed, such as, the specific end point addresses, mileage between them, and distance from the LEC Central Office.
LONG DISTANCE
The pricing here is more of a commodity, and typically will have a fairly close range of what can be expected based on your volume. It’s especially important to have solid benchmarking on the International and Instate rates, as that is where the vendors often have the most variance in pricing.
DATA/INTERNET
This benchmarking effort is largely based on location and discounts provided. There’s typically a fairly large range here depending on service, size, and other specific variables.
WIRELESS
Benchmarking of wireless services such as, cellular, data devices, aircards, and telemetry, is typically based off of a few metrics. Cost per minute, cost per KB/MB, and cost per device. Benchmarking here can be very accurate based on device quantity and discounting structure.
These are only some of the metrics that are defined through benchmarking. Let’s dive a little deeper with Valicom’s President & COO who discusses the benefits of benchmarking when negotiating with telecom vendors:
A telecom contract controls not only price, but terms and conditions, over a long period of time. Long distance rates, mobile data and minute pooling options, internet package pricing and device purchase costs all affect the bottom line. This means that getting the lowest cost, most flexible agreement possible is one of the very best ways to save money on telecom. Taking the time to put out an RFP, carefully compare the responses and actively negotiate with various vendors is well worth the time and effort expended. Utilize your team to put the negotiating power into your hands. This can include IT, telecom, or finance managers.
BENEFITS TO IT + TELECOM MANAGERS
Ensure the best terms and conditions in your contract
Build in flexibility to manage staff size and needs as they change over time
Consolidate vendors if and when that is advantageous
BENEFITS TO FINANCE MANAGERS
Know the contract terms are properly matched to current and future telecom needs
Ensure best features, at the lowest cost, and with the most flexibility
Better estimate future expenses for budgeting and forecasting
RISKS OF DOING TELECOM CONTRACT NEGOTIATION WRONG
The first rule of contract negotiation is to remember that telecom carriers are in business to make money. YOUR money, to be more specific. And as most contracts are for several years, they can take more of it than they should, for a very long time, if you’re not fully prepared and educated in the process.
Internal staff may have little to no experience in how to manage such a process. They may negotiate a few contracts a year or perhaps only one every few years. They may not have a comprehensive telecom inventory and/or know how to write an RFP, how to determine what vendors to send it to, and how to collate and compare the responses.
Meanwhile, the telecom vendors do this all day, every day, and no matter how prepared you think you are, they are better at it than you are. Don’t get railroaded. Be better prepared next time you step up to the negotiating table by accessing professional help.
RFP Outline
With all this talk about RFPs, let’s outline what a standard RFP outline looks like.
1. Write your request for proposal (RFP) – Define what services and options you need for your telecom vendor. What is the contract timeline, how involved will your team be, and what do you actually need?
2. Submit to Vendors – Create a list of telecom vendors – choose a few (or a bunch) to send your RFP. Those interested in your scope of work will respond.
3. Answer Questions – Include a key contact for vendors to reach out to with questions. Provide your answers to all participating vendors.
4. Collect Responses – Accept responses to your RFP right up until a defined deadline. Be sure to confirm receipt of the vendor’s materials – they’ve put a lot of time and effort into their responses.
5. Choose the Right Fit – Narrow down the options, choose a few vendors that you are interested in speaking with. Pose a few more questions to your next tier of vendors.
ADVANTAGES OF OUTSOURCING TELECOM CONTRACT NEGOTIATION
Professional telecom audit teams are very experienced in RFPs and negotiation. They not only know what to look for, they have access to detailed benchmarking data on what prices may be possible, and are aware of what contract terms to request.
They also understand the differences between the wide variety of data, voice, and wireless services, what choices are possible (and advantageous in your specific situation) and are up to date on what specials and promotions the carriers may be offering. The vendors are also less likely to offer substandard prices or terms when the player on the other side of the table knows the game as well as they do.
Additionally, a TEM team can help you develop a complete, accurate inventory of the services to be included in the RFP or contract negotiation. Having that data can be a vital piece in getting the most aggressive rates based on your telecom spend, as well as knowing what service rates will most impact your bottom line.
A TEM partner can be involved in telecom contract negotiation on a variety of levels… some clients prefer to leverage them as a consultant to bounce ideas and information off of, while others turn the entire negotiation over to them. Either way, we can put people in the ring who have years of experience and a working knowledge of what is possible. In other words, we not only know how low the carriers can go, we also know how to fight smart.
Ensure the best contract possible, and the help will more than pay for itself. To learn more, contact us to discuss the options.
WANT HELP WITH IT NEGOTIATION, AUDITING AND COST ALLOCATION?
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