Your Trail Guide to Telecom Contracts - Part Two
Negotiating the Right FIT for Your Business
Part Two: Negotiating the Right FIT for Your Business
About This Blog Series:
Business telecom vendors want to protect their own interests and get you to follow a pre-determined trail in the rigid map of their standard contract. That’s a pretty big problem when your business needs to pioneer, explore, and grow.
If you can form a negotiation strategy that addresses three criteria: Fit, Flexibility, and Freedom, you’ll be able to avoid getting trapped in an unfavorable agreement and instead get a flexible and fair contract that protects you as the maker of your own map for your business.
When it Comes to Business Telecom Contracts, One Size Fits None
Your business needs a custom-tailored telecom contract that fits your business, but that isn’t the trail the telecom vendor has planned for you. Here’s why the details matter.
Most people remember the first time they had clothing tailored specifically for them. Before that, they might have picked suits off the rack, thinking “This seems to fit fine, and the price is right.” Until new possibilities are revealed, it’s hard to imagine that much can be done to improve it.
Then, when a truly skilled tailor gets hold of you and your chosen suit, you can’t believe the difference a few nips, tucks, and stitches can make. It becomes a whole new thing, a custom creation that gives you confidence, and you can’t imagine how you ever went without this level of quality. It’s a big “I didn’t know what I was missing!” moment.
And yet, there’s one step beyond custom tailoring of an existing garment that takes things to a whole new level. If you’ve ever had a bespoke tailored suit built from the ground up, you’ll understand what we mean. You’ve never been measured so carefully in your life, and the feel of a suit that was built just for you to make you look your very best is like nothing else. The confidence it creates is transformative.
Confidence is invaluable when it comes to your telecom negotiations. You need confidence that you aren’t paying too much, confidence that you have enough capacity to grow, and confidence that problems will be resolved. That confidence is found in knowing that the details have been addressed with great attention and concern.
Your business deserves a detailed telecom contract that truly fits your needs, but vendors want to sell you a “one-size-fits-all" solution.
A standard vendor contract for business voice, data, and internet is designed for two purposes.
It works in the telecom vendor’s favor.
It’s designed to make sure you renew at the end of your term.
It’s certainly not designed for the flexibility to tailor a custom fit, and the truth is that no standard, one-size telecom contract fits ANY business, much less yours.
Here’s how you win. If you take your own detailed look at your business through a strategic assessment of your telecom environment, you’ll be able to discover the leverage you need to transform your “off-the-rack” contract into a confident, custom-tailored fit.
What’s Your Plan for Gathering Detailed Measurements?
The first critical step in getting the right fit for your telecom contract is having the right measurements in the form of a Strategic Assessment. If you’re going to get the details right in the contract, you’ll have to understand the details of your current environment.
Most teams will take the time to talk through the strategic goals and requirements that a new or renewed telecom contract needs to meet. That covers the future, but will they also look at the past and present to see how that informs what’s needed? Will they take a look back at a granular level to see what can be learned? A good Strategic Assessment conducts an in-depth examination of your bills, contracts, and infrastructure to read the full story of what’s going on.
Serviam tends to offer a great deal of value by leading and performing the assessment process, as it’s incredibly hard for your internal team to put the brakes on long enough to get this close of a look. However, here’s what could be at stake by not doing it. We’ve seen some powerful results emerge from a Strategic Assessment. For instance…
We negotiated a client contract extension with a major carrier that included the forgiveness of a commitment shortfall in excess of $400,000 while reducing the customer’s monthly spend.
We performed a full assessment of services for a client which led to the consolidation of services from five different vendors and an overall cost reduction of more than 20%.
A telecom contract is designed to resist alteration, but what it can’t resist is the truth. In business telecom, the truth is often buried in overly complex and technical billing formats, and value is often found in the minute detail of contract language.
The Right Measurements Create Leverage for Negotiations
It’s critical to review your billing, contracts, and infrastructure together, as that creates a holistic understanding of your telecom environment that goes far beyond pricing. It helps you see how everything is connected.
Until you see your environment from the perspectives of pricing, contract terms, AND an inventory of your technical infrastructure, you simply can’t see the full story of what’s going on. Once you do, you can recognize how any one of these areas can be leveraged to improve one another. A solid Strategic Assessment reveals a specific, actionable “Leverage Story” for negotiations.
For example, a large, urgently-needed upgrade of technical infrastructure could give you leverage on pricing from the sheer bulk of the project. We’ve also seen big wins on the infrastructure side where critical bandwidth and capacity increases are achieved at a comparable or even reduced cost by guaranteeing a certain commitment in the contract terms.
In the end, there's a need to have a firm grasp of your overall leverage. Just how much business are you providing to the telecom vendor in total? What’s specifically at stake for them if you walk away? Even this macro view can be obscured in the complexity of telecom bills coming from multiple vendors and multiple departments within each one, leaving the big picture yet to be unearthed.
Defining your Leverage Story opens up the “world of the possible” and gives you direction as you map out a strategy for contract negotiations.
The Right Measurements Create a Well-Tailored Telecom Contract
Armed with bespoke-level, detailed measurements and an understanding of your Leverage Story, you’re now ready to find the right fit for your contract, and this applies to two areas.
Vendor Fit - It’s incredible how different telecom vendors truly are in their capabilities and strengths.
Contract Fit - With three years of business at stake in a standard contract term, you owe it to yourself to make sure the fit is right. It’s in customizing the details of an otherwise standard contract where you truly begin to draw your own trail map for the future.
Tactics for Tailoring Your Contract
Here are a few examples where the issue of fit can come into play. You may recognize these as standard business contract terms, but you may not have considered them in the context of business telecom or as part of a larger strategy to gain the Fit, Flexibility, and Freedom your business deserves.
Example #1 - Reframe Your Term-Level Commitments
With the right guidance, you can take something in a telecom contract that feels restrictive or punitive and turn it into the right fit. Often, it only takes one solid, simple idea to reframe the whole situation.
Term-Level Commitments are a great example of that possibility. You’re probably familiar with the idea that a telecom vendor will often require a monthly commitment in order to reach an overall targeted spend for the duration of your contract term.
Here’s where it gets rough on your end.
Let’s say the monthly commit for a cloud-computing service is $8,000. However, under the monthly, “off-the-rack” terms of your contract, you are penalized for being under that goal, and there is no reward for going over.
If you spend under at $6,000, you’re still on the hook for the remaining $2,000.
But if you overspend at $10,000, you still owe $8,000 the following month.
But see how it looks through THIS framework...
Your vendor doesn't just have a monthly target in mind. In calculating the pricing for the service, the vendor has set an overall revenue target for your 36-month term of $288,000.
One way or another, either through actual spending or shortfall charges, they will reach that target, and they also stand to gain anything you spend in excess of the $8,000 monthly commitment.
What happens when you change the game with one, simple idea? What happens if your 36-month commitment is no longer measured month-to-month, but by the entire term? What if the goal is simply $288,000 within the span of 3 years?
Now, you’ve found a way where your monthly commitment can always fit your needs, and you’re even allowed to pay forward on your overall goal. You’ve now turned the old idea of “rollover minutes” upside-down and in your favor.
Also, if you consistently spend $10,000 per month on an $8,000 commitment, you’ve met your Term-Level Commitment in 29 months! In this scenario, you’ve gained fit and you’re ahead of the flexibility game with seven flexible months on the back end of your contract. You could now have the ability to make choices and decisions about what you need for the next 36 months, including the possibility that you need to migrate to a new vendor.
Example #2 – Contributory Charges
If you have a $10,000 monthly commitment for a service, then everything the telecom vendor charges you should count towards that, right?
That’s not always the logic a telecom vendor is following. This will seem like a more sinister practice on the vendor’s part, though not all is as it seems.
Telecom bills are notorious for being overly complex and difficult to decipher. There are an unreasonable amount of parts that make up the whole. In that matrix of charges, some have been assigned as “contributory” to your contractual commitment, and some have not.
It’s not necessarily sinister by design. Somewhere in the vast bureaucracy of the vendor, conversations have been had about what seems fair and logical (internally, at least, and usually based solely on the vendor’s margins on a particular service) to include as a contribution to your committed spend.
The problem is, no one told you, and what seems fair internally doesn’t necessarily feel fair to a client. You deserve to get the full value of the money you’re spending, so ask careful questions about how your Contributory Charges have been constructed and adjust that clause accordingly. Your contract should be the right fit for you, not for the vendor.
Fit = Confidence
Those two examples above are only a few of the ways a contract can achieve the right fit. There are many more tactics we deploy to get the details right because a custom-tailored contract provides a critical benefit to your business. It creates confidence.
You need to be able to walk into your next meeting or your next task of the day focused on how to get the job done. You can move forward knowing, rather than hoping, that your critical voice, data, and internet services are ready to support you.
In business telecom, confidence isn’t a “nice to have”. It’s a “must have” and a key indicator of whether your business has received the attention and service it deserves.
Next in Part Three
Coming up is a look at ways to protect your FLEXIBILITY in governing a business telecom contract throughout the term it covers. How will you be able to re-draw the trail map for your business when your journey hits the obstacles and changes that lie ahead?
How Can We Serve You?
If you'd like help reviewing your telecom contracts and infrastructure for improvements in rates, contract terms, and tech, you can contact us here.
Once a contract is signed, we continue to guide clients and actively manage their vendor relationships. You can discover a long-term partner who becomes an extension of your existing IT teams, allowing your company to focus on its core competencies.
Our availability to take on new clients is limited, but we'd love to hear from you to see if we can be of service. Learn more about Serviam and its unique approach to serving business telecom clients at www.serviamco.com.
The telecom industry expects you to find your own way
through a complex landscape of vendors, options, and risks.
We guide you through those risks
to the right voice, data, and internet solutions
for your business.
Then, we serve as your partner,
managing those solutions
So you can focus on the trail ahead.