Telecom Suppliers are Never in a Hurry
The old adage “Time is money” is directly relevant to the sourcing, procurement and negotiation of enterprise telecommunication agreements. The impact of this time tested truth is magnified when discussions and negotiations involve the current or incumbent suppliers of telecom services. The price direction of the industry has only gone one way for the past 25 years and that is down. Advancements in technology, regulatory changes, competition and the general productivity gains in society have all contributed to the one way march of telecom pricing. Having had responsibility to manage revenue streams for some of the largest telecom carriers, it was my job to put in place processes to mitigate the adversity of industry price declines.
Think about this. What incentive or motivation does the incumbent carrier have to act with haste in reducing the prices for business they already have? This is the same business they have forecast to retain in their budgets and are counting on to meet their performance goals and personal incentives. When deals are renegotiated supplier personnel have a real motivation to delay and above all minimize the revenue impact of customer renewals and contract extensions. Inside the carrier finance organizations, the dreaded process of writing down existing revenue is despised by everyone. As an enterprise buyer, it is important to never forget that if there ever was an immutable law in telecom sourcing it is this: Incumbent suppliers are never in a hurry to write down existing business.
While sympathy for vendors that one considers partners and friends appears noble, it can be extremely costly to the enterprise that doesn’t also balance their own need for market leading contracts.
At TelAuthority we understand these process dynamics and know how to maneuver around them and eliminate the inherent waste and cost to the enterprise. We know because we have years of experience navigating the cumbersome, seemingly complex and at times frustrating procedures we ourselves helped create when working on the supply side of the industry. I like to refer to the process as gamesmanship, but saving money in these tough times is no longer a game. Time spent performing due diligence, soliciting bids, evaluating options, making decisions, negotiating the underlying contracts and terms, is time well spent but time can get away from you if you lose control of the process.
Carriers are mostly to blame for missed savings opportunities, but sometimes there is a large contribution from consultants and advisors that have no incentive for speed of execution. Some telecom consultants and law firms charge fixed fees and hourly fees to negotiate telecom contracts. These hourly fees can be several hundred dollars per hour. I have seen enterprises wait months for contracts to be drafted with unbelievable amounts of time being spent haggling over the precise wording of relatively insignificant legal clauses. Customers continue to hear “they are working on it” yet in the meantime consultant fees are racking up and thousands to even millions of dollars of potential savings evaporate as the new carrier pricing only takes effect once a new contract is executed. As long as the clock continues to tick, savings are lost. With the advent of Sarbanes Oxley years ago, the days of getting partial relief in the form of retro-credits are all but over; so the burden is squarely on the enterprise buyer not to become a victim of this dynamic.
TelAuthority believes strongly in incentive and performance based engagements. We share a common goal with our clients, to drive maximum improvement in the shortest period of time, while safeguarding network reliability and contractual flexibility. If the only benefit we brought to our clients was speed of delivery or acceleration of results, TelAuthority would be providing a valuable service. But we bring so much more and we look forward to speaking with you about your specific situation and opportunities in telecommunication sourcing.
Written By: Bob Arnold
Knowledge is Relative
Knowledge is relative in any subject matter. We have all heard the saying “You Don’t Know What You Don’t Know.” This saying is indeed true wisdom and is especially relevant in the sourcing and negotiations of telecommunications agreements. As a 20 year veteran of the telecom negotiation business, experience has clearly shown that knowledge is not only “relative” but it is also the key driver of results. I have seen hundreds, if not thousands of contracts and have been directly involved in fixing many suboptimal situations for enterprise customers. The common element in virtually all the bad or suboptimal contracts that most enterprises execute is the lack of true knowledge.
As a former carrier executive in charge of pricing, I can attest we (the carrier) undertook great effort to cloak and keep knowledge of the best price points to only a select few with a true need to know. Think about it, as this dynamic applies to virtually all businesses. If the entire company, especially the sales force, that is paid to sell, knew what the lowest available price points were, there would be incredible and undue pressure placed on the organization by these internal sales people to offer the lowest price in virtually all circumstances. Human behavior being what it is; most sellers’ of service put up obstacles and barriers throughout their organizations, even at VP levels, to cloak their aggressive price points.
Given the perpetual, 25 year sustained year over year decline in telecom prices, everyone involved in selling or buying telecom services expects any new deal to be better than the old deal. While this is absolutely true and should be expected, it creates a reference trap that one easily can succumb to at great cost to the enterprise. Enterprise buyers are distracted by the seemingly large savings the new offer or contract from their carrier provides and accept a deal that delivers immediate savings but falls well short of the leading edge or world class standard that was possible. A far better question to ask and get answered is what is a world class contract?
This is the purpose of TelAuthority, to produce world class contracts for our clients. Typically the difference between a so called good deal and a world class deal can be as much as 25%. Given the typical Fortune 500 company spends at least $10M per year on telecom services, extrapolating out the potential impact should be a wakeup call to all procurement and IT executives with fiduciary responsibility. TelAuthority has seen many enterprises fall victim to the limitations of knowledge. Given the state of the economy, it is beyond prudent to do everything possible to ensure this waste does not disadvantage your company.
Where does your company stand? What opportunities to leverage improvements and achieve the higher world class standard exist right now? You must know these answers whether you speak with us or not. TelAuthority will provide the answers and convey the truth in validating your market position and identifying your opportunities for improvement. The times are tough and this knowledge is vital. Our no cost no obligation assessment is an irresistible call to action. You have everything to gain and nothing to lose. We look forward to speaking with you and providing the insight you deserve.
Written By: Pete Wilson
Strategies in a Bad Economy
By: Cynthia Wilson – January 2009
The United States is experiencing an unnerving financial crisis. Everything is in flux and the impacts are significant across enterprises in general. With future sales unpredictable, many companies are hunkering down. But a foxhole may not be the best approach, if, at the end of this mayhem you want to be leading your competition. Savvy enterprise officers are taking advantage and capturing opportunities to maintain a strong cash stream by reducing overhead without sacrificing excellent service and quality. There are several generic cost reducing alternatives and by this time many of the enterprises have completed the obvious ones with some success, but in today’s economic crisis further examination is required.
Experts agree that one area many enterprises overlook is renegotiating contracts with service providers. These renegotiations, especially when managed by experts in the field, prove to be quite beneficial and cost effective to the bottom line. In most cases these negotiations are successful at improving terms and conditions and reduced pricing elements even if the service term has not expired.
For most enterprises telecommunications is a substantial expenditure and in many cases experts in the Telecom Negotiation Industry are able to secure double digit reductions. Pete Wilson, founder of TelAuthority and unmistakably the industry’s leading expert in telecom negotiations has encouraged enterprises to request a risk free assessment. Mr. Wilson stated recently that “Many enterprises are taking advantage of his evaluation and moving forward to secure significant savings and contract modifications which will protect the enterprise from further downturn.” He added that “in today’s economic climate renegotiation of service provider’s contracts is an area that must be evaluated and mined for the diamonds in the rough which are certainly present. “
These diamonds in the rough as Mr. Wilson refers to them can create a significant impact to the bottom line allowing for enterprises to save jobs, support development and or marketing initiatives and advancement in employee training programs which will ensure that you are leading your competition as this financial crisis comes to an end. The enterprise cost is minimal in mining these opportunities especially when outside recourses are utilized.
About This Blog
We hope you enjoy our blog. Our intentions are to convey wisdom about the telecommunications industry that is directly relevant to the issues enterprise companies face in procuring and negotiating supplier contracts. This blog will grow rapidly as we add new post categories and cover the pertinent issues enterprises face in managing their telecommunications supply chain. We are confident our insight will be valuable to you and will expand your understanding into the nuances and idiosyncrasies of telecom procurement. Our goal for the blog is that it will become a trusted and relevant source for wisdom on the telecommunication issues of today. If there is a topic you would like us to address, please let us know.
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Pete Wilson Bob Arnold