Gather Benchmark Data
Being prepared at the negotiating table, and during the length of the contract, is all about having proper visibility across your business. It requires knowing what IT services you’re currently consuming as well as specifics like usage in the case of mobile plans, long distance, and usage-based internet services. It is also important to consider that your company could have sub-commitments in place, which may have been made over time by a branch office, for example, for specific service elements. Securing the optimal contract for your services also requires benchmarking competitive pricing and understanding what you expect the price to be for each service in a particular location.
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Organizations should also consider multiple offers for any single service and approach the process knowing that simply negotiating the lowest rates doesn’t necessarily mean you’re getting the best deal. With the majority of telecom service expenses decreasing overtime, most find that the ideal contract length is two years. Don’t inadvertently get locked into contracts that tempt you with the lowest possible rates but have you paying more over that term. Let’s review some of the biggest mistakes to avoid when managing your telecom contracts.
- Auto-renew: Many telecom providers try to get customers to auto-renew their contracts. Organizations working with these providers should carefully review the language of the carriers’ contracts and make sure that once a contract expiration date hits, the pricing model goes month-to-month at stabilized rates. Often the language in the contract specifies that a company’s contractual rates expire and revert to full, undiscounted “list price” or “tariff rates” upon expiration. Depending on contract terms, an organization’s pricing for MPLS circuits could go up 2.5X if they were receiving around a 60% discount, for example.
- Missing the cancellation ‘window’: Many telecom contracts include stringent rules regarding when customers are “authorized’ to cancel services. These clauses may indicate that a customer needs to cancel services 30 or 60 days before the contract end date, but not more than 90 days out. In other words, there’s a particular ‘window’ when customers can cancel before they go into automatic auto renewal. Not only that, but customers need to know the proper procedure for canceling services. Some providers have a specific email address where customers need to make their cancellation request. It’s critical teams ask these questions early and read their contracts carefully so they don’t miss essential time-sensitive requirements.
- Letting credits expire: Another common contract mishap is letting promotions or credits expire before they are applied. Many telecom contracts include provisions outlining certain credits to offset the cost of carriers’ services. After celebrating a successful contract negotiation, it’s imperative customers make specific notes, as well as set up notifications, as a reminder to actively monitor these credits to make sure they are applied according to the contract. Because it’s often a manual intervention, it may take speaking with the right person within the telecom carrier’s billing organization to get credits applied, as opposed to mentioning it to your account manager outside of the billing dispute window of time, which is often only 90 to 120 days from when the incorrect bill was received.
Successful telecom contract negotiation and on-going contract management can have a huge impact on your company’s bottom line. It’s best to do your homework, set pricing benchmarks, and have a Telecom Expense Management (TEM) strategy in place to help you automate much of the management process. With this approach, you can better control spending while optimizing service flexibility and features.