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
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One Response to “Telecom Suppliers are Never in a Hurry”
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Bob,
I am a Sr. Pricing and Contract Management Consultant at Verizon Business close to being a Manager. In brief, let me state that it is not always the carrier’s fault when one experiences a protracted mind-numbing delay. Many times, when dealing with global accounts it is the customer’s tendency (and those of L3 and other lawyers) to make a ‘land grab’ and demand outrageous things. Here are some of the things I have experienced in my several years of negotiating contracts on behalf of Verizon Business.
18 mos — negotiating Amendment 4 to the contract. The holdup involved our beloved customer wanting to change product descriptions for things like Managed PKI Services. e.g, one site license should support 500 users instead of the 100 supplied by our provider RSA or VeriSign. Other notable setbacks included 6 months bickering on Indemnification on use of Data Center Services and exciting academic arguments concerning an imaginary contractor to the customer who goes roque in our data center. Another few months were spent defining “material harm” or “material intent” with numerous examples thrown out by each side as to what these terms should mean and what the associated penalties should be.
24 months — Negotiating a contract renewal for one of those consulting firms with no physical headquarters (but tentacles everywheres). These types of firms require you (the helpless carrier) to sign an agreement with XYZ Procurement Inc to which ABC Consulting of USA signs an addendum. This particular country-specific addendum (of course) is utterly toothless and without responsibility for ABC Consulting of USA since they are using XYZ Procurement as a Cut-Out between them and Verizon Business. Multiply this approach by about a dozen countries, thrown in the laws of Swiss Vereins, laws of Bermuda and you can imagine our heartache in trying to assign fiduciary and contractual responsibilities to an amorphous blob-like organization that is fundamentally opposed to these concepts.
24 months — contract renegotiation of a system integrator based in Plano lately swallowed by a computer firm in Round Rock Texas. We spent months upon months defining terms and fighting the infamous TPI SLA penalty matrix. (Do ask me to explain this some time)
I can go on Bob but us helpless carriers are not always the bad guys. We encounter extremely tough global customers. Of course, with someone like me on our team, we always win. I am willing to argue this point with you if you are brave enough for discourse with someone in the field.
Warm regards,