Negotiating a telecom contract that provides outstanding service without killing your budget is a delicate task. Telecom providers operate in a competitive marketplace, and this can give businesses an edge in negotiating pricing and services. However, there are many variable elements and contract clauses that are important to consider in your negotiations.
It’s important to do your homework. You need to keep up with changes in the marketplace and understand what might be available to your organization. A well-negotiated telecom services contract is one that defines all appropriate services clearly and completely. Every organization has its own needs and circumstances, and you want to find the telecom contract that is right for you.
Telecom contracts are complicated. Unless you are careful and knowledgeable, it’s easy to miss critical items when negotiating. While contract terms vary widely, there are several key characteristics you should watch for.
Here are seven tips to get you started:
1. Aim for the Short Term
As we all are painfully aware, technology changes daily, so you need a telecom contract that allows you flexibility. A contract that runs longer than three years may compromise your ability to keep pace with your competition.
In addition to new technology, keep your options open for variables such as:
- Price reductions
- Service level agreements
- New managed services
- Platform convergence
- Changes in legal liabilities
A close review of your contract and skilled negotiation can get you the services you need while sticking within your budgetary guidelines.
2. Look for Appropriate SLAs
The review of service level agreements (SLAs) is one of the most important things to do when you are negotiating a telecom contract. What seems to be a small contractual term can end up having a real impact on your cost and service quality.
SLAs spell out specific services and quality parameters that will define the services your business will receive. These might include measured service availability and reaction or notification times. They might outline rate reductions or discounts you will receive if the provider fails to deliver the agreed upon services. Security and technical issues are also involved.
The quality of SLAs is important, so you will want to research what’s trending and make sure you are taking advantage of the latest safeguards. This will help you negotiate a contract that delivers the best possible benefits to your organization.
3. Don’t Miss the MARC
Minimum annual revenue commitments (MARCs) are minimum annual costs—and sometimes unnecessary penalties—that you are obligated to pay if your business usage doesn’t measure up to the carrier’s expectations. These clauses are usually found in the master service agreement or the contract’s pricing schedule.
Though MARCs are less common than they used to be, you should be aware of them. In our experience, smaller carriers are more willing to waive a MARC completely, and that can give you some room for negotiation with a larger carrier. Ideally you should aim to negotiate a contract with no MARCs at all. If you can’t eliminate them, keep an eye on rates during your negotiations. A contract with low MARCs might result in higher rates.
4. Get Flexible Scalability in Terms & Conditions
Your contract should adjust with changes in your business. If you add new locations during the contract term, you want the ability to use more services at similar or reduced rates. If circumstances force you to close a plant or warehouse, you want to have the flexibility to stop billing at that location.
Review the Terms & Conditions of your contract with a fine-toothed comb. You can negotiate carefully worded clauses that will determine your scale of flexibility within the contract. This can allow your monthly rate to change as your business changes.
5. Watch for a Terminate-for-cause Clause
If you enter into a contract with your provider, and it under-performs, you can break the contract, right? Don’t count on it—unless you have built in a “terminate for cause” clause. This clause lets you terminate your contract when service is not as promised. Causes might include unmet service level agreements, poor customer service and missed deadlines
A terminate-for-cause clause is especially important if you are changing to a new telecom provider. You might even put a probationary time period in the clause that allows you to discontinue service with a new vendor within a certain amount of time. This can save you headaches while helping to ensure that you receive high quality service.
6. Beware of Auto-renewal Clauses
Steer clear of auto-renewal clauses that lock you in for another year at the end of your contract’s initial term. Request that your contract continue on a month-to-month basis until you can renegotiate a new contract. If you take advantage of any special promotions, know when they end and what will happen to your services and pricing after that point. This will save you from the shock of suddenly higher rates that you are then locked into.
7. Take Names and Numbers
Insist that your provider supply specific names and contact information in case you experience any service issues. If your account or customer service rep is not meeting your needs or can’t resolve your issues, you’ll want to know how to escalate your problem to a higher level of management. It’s best to get this information up front while you are negotiating your contract. This safety measure is common practice and will ensure your account gets proper attention and that problems are resolved as quickly as possible.
If all of this seems too complicated or too much to manage, find a trustworthy telecom consultant who can negotiate your telecom contract for you. Cost Control Associates offers unbiased expertise and experienced telecom analysts who are well-versed on the ins and outs of telecom contract negotiation. We work with telecom providers across the U.S. and can help as much or as little as you need.
Valerie Paquin is account executive and senior analyst at Cost Control Associates. Since 1999 she has developed her utility-cost expertise for energy, water/sewer, telecom and waste removal. She earned the designation of project executive in 2012. Valerie received her ABA in accounting from State University of New York-Adirondack. Learn more.