Always Obtain Competitive Pricing
If you’ve ever purchased your home or put your home on the market, your real estate agent most likely provided you with comparable pricing (Comps.) to help determine your asking price or your offer. In fact, you cannot secure a mortgage without having an appraisal which undoubtedly included a comparison of similar homes in the area.
When you consider the fact that many telecommunications agreements span the course of 36 months or 60 months and are often renewed using the original agreement as at least some type of baseline, it’s easy to see that this agreement can easily far surpass the amount of money spent on a home. For example, a client who spends $5,000 per month on voice and data services will spend at least $300,000 over only 5 years.
Given this reality, we think it makes sense to give this contracted decision the effort it deserves. We recommend reviewing at least 3 competitive options before making a purchasing decision. As a consulting firm, we are uniquely positioned to also compare the pricing of each provider against pricing that has been offered, from that same provider, to other clients making similar purchasing decisions. You might be surprised to learn that providers can often discount their pricing anywhere from 10 to 40% or more.
We know that you don’t likely have time to review multiple options, and having sat on the other end of the negotiating table working for the carriers, we didn’t like to have our time wasted by organizations that were seeking a ton of quotes knowing only one company can earn the business. Reasonable balance is the key. Before making a six or seven figure purchase, it certainly makes sense to ensure you are considering at least a few options.
When seeking competitive options, don’t stick to the same providers each time you negotiate. Find out who the providers are in your area and check with a couple different types of providers. If you would like to see a fiber map of your facilities, we are happy to provide complimentary fiber map(s) for you with no obligation or pressure to become our client.
Never Wait for Your Current Agreement to Expire
Most of the clients we work with want to honor their contracts and we commend that. With that being said, many clients are surprised to learn that voice and data providers are often happy to open up their contracts for negotiation mid-term. For example, we recently worked with a client who had two years left on an agreement with a major service provider. When we brought that provider an example of another one of their own clients who secured a better rate, that provider was willing to lower their price by over 50%.
It turned out to be a win-win opportunity. The Account Manager was able to extend the client’s agreement a little bit, retain the client, and even help the client improve upon their service. The client did not have to wait two more years to realize these benefits and didn’t have to change service providers. Because this client did not wait for their contract to expire, they saved more than $40,000 over the next two years and upgraded their bandwidth, all in the time they would have remained under the original agreement.
We certainly recommend our client’s honor their contracts. We simply don’t feel that means that they cannot discuss opportunities that may exist in the meantime. Give it a shot. The worst thing that can happen is they might say no.
Always Mind Your
Ts & Cs
It’s true that terms and conditions are generally presented in a boiler plate document which is generally the same for all clients. What’s also true is many times service providers can add addendums or change the language as part of their negotiations. Some of the items we recommend seeking include:
· Service Level Agreements: Generally service level agreements don’t have much for teeth. If you service is down for two days, you are generally entitled to a credit worth about the cost of two days service. This doesn’t really provide much urgency on the part of the provider nor does it give you much recourse. We recommend seeking a commitment that if the provider does not live up to a minimum standard that you as the client would be willing to walk away from the agreement without early termination liability.
· Price Match Guarantees: We have seen many agreements include language that requires service providers match a bona-fide offer from a legitimate competitor at the midpoint of a service agreement. This clause has saved our clients hundreds of thousands of dollars collectively over the past few years.
· Business Downturn Clauses: Many providers will offer the ability to cancel a location or a percentage of the services under certain circumstances. It’s not uncommon, for example, that a multi-location client will have the ability to cancel services at a location if they choose to close that location.
· Move Clauses: When dealing with fiber in particular, it can be tricky to negotiate move clauses. It’s not going to be clear if an unknown potential location is serviceable especially at a given price point. We’ve found success requesting language that will allow the provider first right of refusal if a location is moved but allow the client to cancel their services with no liability should that location not be serviceable at the contracted rate.
· Rate Locks: This did not used to be a big issue. Most clients think that if they negotiate a given rate it will be locked in. That is no longer to be taken for granted. Last year alone, we had several clients see price increases anywhere form 8% to 72% even though they were in a contract. The worst part is that some of those agreements allowed the providers to unilaterally increase the pricing without giving the client more than 30 day’s notice and without allowing the client to cancel their services without early termination liability. If you are making a commitment to a service provider, make sure they are guaranteeing your rates!
If there is anything we can do to help you with your contract negotiations, please reach out to us. Otherwise, we hope these tips are helpful to you and wish you the best as you manage your voice and data contracts.