Is Your ISP Working for You? Renegotiating Your Connectivity Contracts

By Beth Cohen | Nov 3, 2003 | Print this Page
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Are your telecom and ISP contracts up for renewal soon? Even if they are not, if it’s been a couple of years since you last looked at them, it may well be time to dust them off for review. Between deregulation, the convergence of technologies, and the glut of available infrastructure, the telecom and datacom industries have changed enormously over the past few years. Plus there’s a great deal of uncertainty in the telecom market right now, all of which can mean an abundance of opportunities for reducing your company costs and improving service on all your network and telecom needs.

And consider these two scenarios:

Is your company vulnerable to service cutoff? When Genuity, an ISP with a Fortune 2000 client list, was purchased by Level 3 last year, 250 of their smaller (read less profitable) accounts were rudely shocked after Level 3 decided to unilaterally end their contracts prematurely. Level 3, a company primarily known as a wholesale telecommunications carrier, was just not interested in their business. There was a mad scramble as these companies fought to reestablish connectivity with alternative carriers.

Do you have an alternate or secondary provider already committed? The lesson was not lost on one Boston area college that recently added wireless service access as a backup when they realized that their excellent long-term provider was the single point of failure for their network connectivity. Switching to a wireless provider as a secondary source of connectivity solved a number of potential connectivity problems and saved them substantial money in the process.

By not paying attention or staying current with all of the alternatives available, are you missing the opportunity to realize substantial savings on your data and telecom services? Now is the time to take advantage of the huge opportunity to shave significant cost and improve service by renegotiating your connectivity contracts or switching carriers. Let’s explore how to squeeze cost savings by renegotiating or restructuring the contracts with your network services providers.

Page 2: Reviewing Your Service Needs

Reviewing Your Service Needs

When looking for connectivity contract savings, the first and most vital step is to assess your real requirements. There are many consulting companies available to help with this process. Some companies offer to review your requirements and inventory your current service for a fixed fee, while others will offer to split the savings with you. Several offer a choice dependent upon your specific situation.

No matter what, using a consulting company can still save you because they are familiar with the specific details of the telecom industry and know exactly what to ask for. Remember, telecom companies have been negotiating these agreements for years, so unless you know what you are doing, you’ll automatically be at a disadvantage. Pay attention to the contract’s fine print. For example, substantial late payment penalties can accrue if payment is late, but payment deadlines based on when your company receives the bill will help you avoid the problem.

Here are several guidelines for effectively defining your service needs to gain a better advantage at the negotiating table:

  • The first step is to determine your current and future telecom/connectivity needs. What services do you use today and what will you need in the future? If you are planning to open ten new locations in the near future, include that in your planning. If you will be moving your development offshore, your usage patterns are likely to change drastically. The more you can define your requirements, the more haggling room you will have with the carriers.

  • Do you use services that can be packaged together? Even smaller companies use many types of telecom services, including local exchange, long-distance, Internet access, toll-free 800 numbers, teleconferencing, and high-speed, high-capacity services.

  • Do you have enough traffic to justify a secondary provider? Even the smallest company should have some kind of fallback service, even if it is as rudimentary as a dial-up connection when your main primary ISP is unavailable.

  • Can you afford to be off-line for any significant amount of time? For some companies being off-line can mean millions in lost revenue, so reliable alternative service is mandatory for business survival. If your company absolutely, positively must be connected at all times, you should be looking for redundancy and alternative carriers.
Face it, no modern company of any size can afford to be without phone or data connectivity for more than a few hours. Using these tips when reviewing your company’s connectivity needs will help you quickly identify your potential savings and give you more control when you are bargaining with your providers.

Page 3: The Negotiation Process

The Negotiation Process

Once you have determined your service needs, take a hard look at your current contract. As Steve Williams, President of McBeth Williams, a vendor-neutral telecommunications consulting firm that focuses on Fortune 1000 companies, puts it, “Don’t wait until just before the renewal date to do your negotiating. You are in a much better position reviewing it year to year, or even month to month if you are a very large company. If your company has exceeded your MARC (minimal annual revenue commitment), you are in an excellent position to negotiate with either your current carrier or a competitor.”

“The contract always started with the idea that you will have a good relationship with your carrier. Unfortunately, that rarely happens, so you need to use metrics like SLAs (service level agreements) and MARCs to renegotiate quarterly or month to month,” cautions Pete McBeth, McBeth Williams’ Director of Business and Telecommunications Strategy.

Here are some important tips when planning for and negotiating your services contracts:

  • Review all of your invoices and contracts for the past year. Look for your patterns of usage. Nowadays, many providers are happy to create packages to suit your exact requirements. “It is not uncommon for our clients to save 15-20% off their old contracts just by changing the terms to better match their usage patterns,” says Vincent Gisone at Comtel Group, Inc., a telecom consulting company that services mid-market companies.

  • Avoid committing to locked-in rates and services. If the carrier insists on a multiyear contract, be sure to stipulate a review of the terms at least once a year so that your company continues to receive market-competitive rates and service.

  • Prepare a RFP (request for proposal) that specifies the services you need so that your existing carrier and others can make informed and comparable bids.

  • Make sure that you carefully define your required SLAs. Your provider will need to commit to responding to service calls within a certain period of time and give credits for service outages lasting beyond the specified period. Rates are understandably important, but when your phones or data services are not working, you want prompt resolution of your problems.

Because the market is highly competitive, companies do not have to be huge consumers of telecom services to get good rates and services. Still, you’re going to get the best deal if you are able to negotiate with the carrier directly. While that’s great if you are a large Fortune 1000, life is a bit tougher for mid-sized businesses.

Carriers are spinning off their mid-market segment to VARs (value-added resellers), so that the carriers can be more selective about their customers. That hurts the ability of small and mid-sized business (SMB) customers to push for the best deals, but with the industry still reeling from the past few years, bargains are still available.

Conclusion

In the end, despite all the hype, there is often little or no difference in network quality between the providers. However, there can be huge differences in the service quality, price, and available features. By being careful and matching your requirements to your providers’ products, coupled with some sharp negotiations, you can realize substantial savings plus better service, making both you and your management happy.

It’s also important to prevent leaving your company vulnerable by purchasing services from only one provider. Advance planning for alternative service in case of a connectivity disaster helps ensure business continuity, which will make you look even better in the eyes of management. What could be better than that?


Beth Cohen is president of Luth Computer Specialists, Inc., a consulting practice specializing in IT infrastructure for smaller companies. She has been in the trenches supporting company IT infrastructure for over 20 years in a number of different fields including architecture, construction, engineering, software, telecommunications, and research. She is currently consulting, teaching college IT courses, and writing books about IT for the small enterprise and wireless network security.

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