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How much power do I have to negotiate contract terms with telecom carriers?

When working out the terms of contracts with telecom carriers, you do have some room to negotiate. Learn where it pays to be flexible and where you should stand firm.

When it comes to contracts, how much power do I have to negotiate with telecom carriers? Which terms can I negotiate?

Honestly, it depends. Keep in mind that many telecom carriers have a standard set of contract exceptions that they can approve at a local or regional level without getting their legal and finance departments involved. Whenever possible, you want to keep your negotiations as localized as you can -- local reps and sales managers have more "skin in the game," so they are likely to be more accommodating within their scope of power than some lawyer 3,000 miles away.

Keeping that in mind, there are several other variables to consider:

  • With which telecom carrier are you trying to negotiate? Typically, smaller CLECs will be able to offer a lot more flexibility in contract terms than incumbents like the big regional Bells. But even among similar-sized companies, there will be peculiarities where one carrier is more flexible than another in a specific area.
  • How big a fish are you? Note that I didn't ask how much do you spend. Here's why. If you are going in on your own and you want any real significant changes made to the contract, you probably need to be prepared to be signing a deal worth a minimum of $5,000 per month. That doesn't preclude some standard changes that can be made, but if there is something really hanging you up, you may not find that telecom carriers are willing to be too flexible if you're ordering two POTS lines. Working with an agent can give you a little extra clout. Remember: Agents represent a lot of business to telecom carriers, and can put some pressure on the right players in order to make things like contract concessions happen.
  • How flexible are you? Can you extend the term of the contract? Maybe pay an installation charge or commit to giving the carrier more business? Come up with something and try and be reasonable. In most cases, you'll find that giving up a little can actually gain you a lot.
  • What are you trying to negotiate? Again, be reasonable and be willing to listen. Ask yourself why you have a problem with a particular clause and help the carrier to understand your objection. A good agent or carrier account team should be able to explain the company's position on issues on which they are rigid. Sometimes you might not need the concession; maybe you only need clarification on a particular clause. Be open to that.
  • When are you negotiating? If legal and finance personnel have to get involved in negotiations, be prepared to spend two weeks waiting for a contract to sign. Also, remember that the telecom industry is absolutely neurotically driven by monthly and quarterly cycles, so you're most likely to get the most accommodations around the end of the month. The opportunities get better at the end of a quarter and even better at the end of the telecom carrier's fiscal year, so plan accordingly.

As an agent, there are a few standard clauses that I ask telecom carriers to add, modify or remove, regardless of the size of the deal we're working on:

  • Evergreen clauses: Without a doubt, my biggest pet peeve. This clause allows the telecom carrier to automatically renew you for either another one-year term or a whole new identical term at the end of your contract. I have never been denied a request to remove this.
  • Business downturn: Some carriers will allow you to get out of your contract early if your business experiences a significant downturn or change. This allows you to sign a longer-term deal without fear of being stuck with services you won't need if business cycles down.

A little preparation can go a long way; a little flexibility can go even farther. If you match that up with some business and industry savvy, you probably can't lose.

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