While the initial period of negotiations during telecom procurement gets lots of attention, telecom contract midterm negotiations often fall by the wayside–even though they’re a fantastic opportunity to win improved terms and rates from your telecom supplier. This article will discuss the best ways to achieve business objectives and earn cost savings through telecom contract midterm negotiations. Also, learn how to negotiate telecom contracts efficiently.
In need of expert guidance to help your company benefit from telecom contract negotiation services? Technology Procurement Group’s professionals will be happy to help you. Reach out by calling us at 1-888-449-1580, emailing us at info@TPG-llc.com, or completing the form at the bottom of the page.
Why Telecom Contract Midterm Negotiations?
Even after signing the initial contract, remember that your company is not at the vendor’s mercy. You retain considerable leverage and power that is especially useful during telecom contract midterm negotiations.
Your company’s procurement team needs to be aware that it’s much cheaper for a telecom vendor to keep an existing customer than to find and sign a new one. For this reason, your organization has quite a bit of power when it comes to telecom contract midterm negotiations, as the vendor will not want to lose you as a client.
Also key to know is that telecom costs are decreasing at a rate of 20% per year, giving organizations leverage to negotiate lower prices during telecom contract midterm negotiations. Agreeing to specific pricing at the beginning of a three-year contract does not automatically mean your company must continue paying the same price for telecom services throughout the duration of the contract term.
In short, the odds are in your organization’s favor when it comes to telecom contract midterm negotiations. Telecom is generally a buyer’s market in which businesses can choose between dozens of different providers and are able to negotiate their way to the best deal and most favorable contract.
Throughout the contract term, it’s wise to develop a partnership between your business and its vendor. The telecom provider will grow to learn that your organization is not willing to spend its hard-earned money on inflated telecom costs, and you and the vendor can work together to form a more mutually beneficial relationship.
Telecom Contract Midterm Negotiations Strategies
To complete the midterm telecom negotiations process, you can follow telecom contract midterm negotiation strategies.
1. Shot Across the Bow
During the contract term, a wise strategy is for your company to engage its primary two or three vendors for new service needs and additional locations. The key is to order services from someone other than the vendor who won the last telecom contract. This is called a “shot across the bow” of the existing vendor. It effectively keeps the vendor on its toes when it comes time to quote and negotiate the next deal.
2. The Supplier Preference Model
Just as your company’s procurement team measures its strategic and critical vendors against each other, telecom suppliers also have their own customer account rankings–and it can benefit your company to analyze its place in these rankings.
Depending on factors such as your company’s profile, its future growth prospects, and how much it bills with the vendor, the vendor will either develop or attempt to exploit your company’s account.
Therefore, identifying the vendor’s perception of your company allows your team to leverage its position to its advantage. It also enables your procurement team to take action in order to advance in the vendor’s preference model so that your company will gain additional leverage over time.
For instance, your company may be able to consolidate contracts to increase overall revenue. Another option is to sign long-term agreements by introducing new products and solutions from the vendor. Using quick bill payments to foster a better relationship with the vendor is also excellent to build up leverage.
In addition, your procurement team should arrange meetings with the vendor’s high-level executives so that they’re on your team’s side when the time comes to negotiate future deals.
3. Special Circumstances
If there’s some sort of event negatively impacting your business, it’s an opportune time to go to the vendor and ask for rate reductions as an act of goodwill. Consider the COVID-19 pandemic, for example. Many enterprises sent employees home, businesses were shut down for months, and IT and networking needs changed instantly.
The telecom industry saw many impacted businesses ask carriers to let them out of agreements without penalty. Some asked for rate reductions; others asked for immediate bandwidth increases at no additional cost. Their requests were granted by the telecom providers to show their commitment to their customers. The industry has also seen instances in which healthcare customers were impacted by Medicare reductions, and they were motivated to ask their service providers for pricing reductions.
4. Approaching the CIO and Board of Directors
There often comes a time when your procurement team must approach the company’s CIO and board of directors to get approval for new telecom services or a change of telecom vendors. Often, these meetings are not very fun because many procurement professionals feel like there is a risk of getting fired. However, there are plenty of strategies and tips to help this meeting go smoothly and successfully.
- Remember that 48% of CIOs are present quarterly, 24% only show up two times a year, and the remainder are never there. Your procurement team has much more knowledge of what goes on in the company daily because it is so much more present. The key is to become the board or CIO’s trusted advisors.
- Here are a few key questions to answer:
- Since the business desires that technology be used as a competitive weapon, how will your procurement team execute and communicate its plan?
- How can your procurement team best get across its goals and planned procedures? (Keep in mind that, due to age, the board may not have extensive familiarity with the types of technology being discussed; sometimes, the board may even go around the CIO and go to other technology advisors.)
- What does the board care about? Is it revenue, cost reductions, risk mitigation, or something else? Structuring and organizing the presentation about whatever the board cares about is an excellent choice.
- Be upfront! Tell the board precisely what is needed and be clear about it. However, be sure to offer at least two choices, rather than making them feel like they only have one option.
- Since leadership typically doesn’t know where the business should go, your team needs to communicate where they believe the company should go and allow for a co-creation process.
- Keep the presentation short and sweet; 15 minutes is enough. Talk about the risks of the decision at hand with accuracy, sharing relevant notes as needed. It’s essential that the information presented resonates with the board or CIO and that they aren’t bored.
- Map out your business’s current capabilities and display the limitations of the current situation. When needed, educate the CIO or board and create a story to guide the discussion.
- Work toward shared goals and business outcomes to ensure everyone is on board with the decision.
- Consider presenting the trade-offs to obtain better buy-in for the ideas; this will encourage discussion.
- Remain diplomatic at all times. Most of the problems being addressed have stemmed from the person or people in the room. The procurement team needs to display their business acumen.
- When using data, be sure to directly interpret it rather than assuming the CIO or board will understand it in the way your team expects them to. When building charts, label the “key messaging” from the data presented at the top.
- Once your team has gotten a “yes,” it’s time to shut up and get out. Otherwise, there’s a chance of “unselling” what was just sold.
- After receipt of the money and implementation of the project, tell the before and after. Talk about how it impacted customers, improved revenue, and reduced cost and risk. Photos, videos, and testimonials are great additions to this before and after story.
Get the Most Out of Midterm Negotiations with TPG
Technology Procurement Group’s procurement professionals can help you maximize your midterm negotiations, and when it comes time to renew your contract or choose a new supplier, we’re here to guide you.
Not only do we offer telecom procurement strategy consulting and IT procurement services, but we also provide telecom and wireless expense management, RFP management, wireless expense reduction, and telecom contract negotiation.
Ready to work with us, or interested in getting more information? Call us at 1-888-449-1580, email us at info@TPG-llc.com, or fill out the simple form at the bottom of the page. We look forward to working with you!