Tackling telcos

There's room to move in telecommunications contracts these days, with hotter competition for larger organisations in particular. But don't expect to haggle big price cuts if you're a minuscule start-up out in the country, finds David Watson.

There’s room to move in telecommunications contracts these days, with hotter competition for larger organisations in particular. But don’t expect to haggle big price cuts if you’re a minuscule start-up out in the country.

Negotiating telecommunications contracts is a very different matter today than a decade ago. Back then, the person in charge of IT often wasn’t responsible for telephony and the latter was fairly straightforward, with little apart from standard copper lines to worry about.

Today, finding the best telecommunications deal for your organisation is a different proposition — the arrival of mobile telephony, the internet, email, VoIP and other technologies has introduced many more variables and things to nail down.

Australian Gartner analyst Geoff Johnson told Computerworld last month that now is a good time to renegotiate your telecomms contract, as the meltdown in the telecomms sector means service providers may be willing to accept favourable terms to secure business.

Murray Young, director of Auckland firm Teleconsultants, which advises medium-sized and large firms on telecomms issues, advocates a little caution. He says the meltdown argument is accurate in the global context, but doesn’t entirely ring true for New Zealand.

“On a worldwide scale, there’s a glut of capacity and in New Zealand that’s the case in metropolitan areas. However, it hasn’t dramatically affected prices and I’m not sure it will.”

One change he has noticed, however, is that providers are more willing to have a degree of flexibility.

“Flexibility is something that wasn’t seen in the past and we encourage clients to negotiate a degree of it into contracts.”

By flexibility Young means negotiating a contract that “allows for changes in the business environment” and that has reviews written in to the terms, perhaps every six months.

Another must-do for a telecomms contract in today’s times is to “negotiate in some ability for a technology refresh”.

“If you’re negotiating a three-year contract, then it should be written in at some point past the middle of the term.”

He disagrees with the view of Gartner’s Johnson that short-term contracts, of a year’s duration, are the way to go.

“It’s better to go for a two- to three-year contract, but with reviews every six months. That way both the telco and the customer get some continuity — every six months you can go back and talk about what prices are doing.”

A price review clause is a must, Young says.

Telcos will accept penalty clauses in contracts, something uncommon in the past, Young says.

“There are real penalties, not just rebates on service costs. We’re seeing contracts where if the SLA [service level agreement] fails two months in a row, the contract is up for review.

“That was unheard of two years ago.”


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