WASHINGTON—”Carriers lie like addicts in withdrawal,” observes Hank Levine, a lawyer who has spent the last 10 years negotiating telecommunications contracts for large enterprises.
Its not that telecom carriers are evil, he said, its just that they are highly motivated to clinch large contracts, and enterprises often misjudge their own bargaining power. So before entering into the next round of negotiations with a service provider, take these tips from Levine, a partner in the Washington firm of Levine, Blaszak, Block & Boothby LLP:
- The “best and final offer” is never really the best and final offer.
- Carriers expect prices to fall further, even though they say they dont.
- Service guides, the “sleeper cells of telecom contracting,” are not binding like contracts themselves.
The key to getting a good telecom deal is maximizing the enterprises leverage, which, surprisingly, doesnt necessarily correlate to its size, according to Levine.
“It is not about how big you are when youre in the enterprise segment, although the vendors will tell you it is,” Levine told telecom professionals Monday at The Yankee Groups Telecom Industry Forum outside Washington. Instead, its about information, timing and diversity.
Understanding ones own network is the first step to wielding power in negotiating with service providers, according to Levine. It is vital to know the specifics of the network traffic before discussing offerings and options. Even though carriers often frame offerings in ways that make it difficult to compare apples to apples, with enough research such comparisons are possible.
Timing can also be used to the enterprises advantage. The best time to negotiate is six months to a year before a contract is set to expire, Levine advises. After that, there isnt enough time to hold out for the best deal, but before the one-year-to-go mark, carriers have little incentive to bargain.
“When youre 18 months or two years out, the vendor doesnt have to do anything for you,” he says.
Maintaining carrier diversity is not only a bargaining chip but also a key to data reliability in the current networking environment, even though carriers may tell you otherwise, Levine cautions.
The worst thing to do to squander the enterprise leverage is to get locked into a long-term contract. A two-year term is typical in todays market, and longer terms should be avoided even if they come with slightly lower rates, in Levines opinion. In fact, if a carrier considers an enterprise to be in a long-term, “special” relationship, it can cost the enterprise more.
“If your president is on their board and their president is on your board, that will cost you another 10 percent,” he says. “If youre not going anywhere, theyre not doing anything for you.”
Levine recommends establishing stabilized rates and an annual rate review. Also, it is best to limit the carriers right to change the underlying tariffs, service guides or acceptable use policies, he says.
Finally, be aware of payment terms, which some carriers are increasingly strict about, and remember that the date of an invoice is not the same as the date of receipt. Levines tip: “Carriers date invoices15 days before you get them.”
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