long distance services


14 Telecommunications Mistakes

If your company doesn't have a good telecom services deal, it's possible your telecom department is subverting purchase negotiations with the carriers by making one of the 14 mistakes listed below. Once you've identified the problems, take proactive steps to mitigate their effects.

  1. Your team is too close to the carrier's local account managers. Carriers spend millions of dollars positioning themselves with managers of telecom services. Meetings may provide information and insight to customers, but the account manager's covert purpose is to develop close ties with customers; ties that generate a sense of obligation. "So, Joe, off the record, what do we need to do in order to keep your business?" account managers might ask. If you reveal this information and don't demand competitive prices and terms, you may leave millions of dollars on the table in unrealized savings. Implement a departmental policy to not provide off-the-record information to a carrier's representatives.

  2. Your team focuses on instant savings instead of market pricing. The most common strategy used by incumbent carriers is to put undue pressure on telecom managers to make an uninformed decision in a very short timeframe. If the carrier senses that you're not a happy customer, they might propose that your company could save $600,000 by signing now. That sounds like significant savings until you learn to ask better questions such as, "What is best in class?" "Or what are my peers paying?" In a recent negotiation, one network manager lost millions of dollars by locking in immediate savings instead of taking time to look at the larger picture and gather data. One shortcut to gathering the data is to engage outside experts who know what you should be paying and how to better utilize your leverage to get competitive market pricing.

  3. Your current carrier doesn't fear loss of your account. Simply because you shop around does not mean that you will award your business to a new carrier. Most of the time the current carrier gets awarded the business unless there are serious service or relationship issues. If the carrier who holds your contract doesn't believe there's a real possibility of losing your account, why would it give you a better deal? Also, if a potential supplier doesn't believe it really might get the account, why would the firm waste time and energy to work up a good request for proposal (RFP) response? It's important to search the market honestly for the best deal with the genuine intent to get the best prices and terms, even if changing carriers is necessary.

  4. Your carrier's account team is inexperienced or ineffective at representing your interests to the carrier's upper management. In any business, the employee has to understand how to use the internal resources of the company to get the best deals. If you feel that your carrier's account team is weak or ineffective, you may need to move higher within the company's organization structure.

  5. Your team uses the RFP process improperly. Some companies turn what is a formal request for bids into an onerous legal procedure that requires bids to cover every possible contingency. For example, some RFPs request pricing on one-, three- and five-year terms to include voice, data or both services. In response, the carrier prices some high and some low, thus steering customers to what the carrier wants, rather than what the customer needs. Just use the RFP to get early price commitments before you seek terms, conditions and service levels.

  6. Your team lacks sufficient time to focus on telecom repricing. This is where outside consulting teams will make a big difference. These teams have the time, resources and reference points to improve contract prices and terms efficiently.

  7. Your team doesn't know the carrier's costs to provide the services. Knowing the cost of each specific service gives you the ammunition to request better prices and terms. You can't be expected to know this information Although no one can expect anyone in your department to know the carrier's costs, an outside consultant can help you set aggressive yet achievable price targets.

  8. Your team doesn't maximize your volume leverage. Carriers try to get voice and data contracts to come due at different times. Your company may be better off with contracts that are concurrent contracts, which can be bid out together for maximum volume leverage now and in the future. Often a company's overall usage will demand significantly better rates and terms when all services are bundled together because this increases the amount of dollars involved. Some carriers claim that they cannot put deals together, but that is not true, although some carrier representatives may say this with full integrity based on what they're told.

  9. Your current carrier is eavesdropping. Most large telecom departments have a carrier representative working onsite. One company that was paying too much for its telecom services was preparing to find out how competitive its telecom rates and terms were. But the company had an online scheduling system and five carrier-provided representatives working in its telecom department, so the carrier was aware of the threat in advance and had prepared a response before its customer even had its first meeting.

  10. Your carrier's account team and your internal telecom departments have a limited frame of reference. The carrier pricing strategy is an intentionally complex maze designed so that sales managers know only what they've experienced. Carriers don't keep their sales force informed of the best deals because this would put undue pressure on pricing. Unless you do an extensive tariff research or you engage outside telecom experts, you cannot really know what the best deals are on a national or international scale.

  11. Your team is not utilizing outside specialists. The landscape of telecom pricing and terms shifts fast and often. Even if you have competent negotiators on staff, their skills cannot keep up with rapid changes in the market. You need current market knowledge to supplement their skills.

  12. Your team is waiting for contract termination to negotiate new prices and terms. Any good telecom contract needs to have the rates adjusted a few times prior to contract termination. Often telecom contracts have competitiveness, stewardship or benchmarking clauses, but price reductions can be leveraged even when these leading edge terms aren't in the contract. The key is knowing your leverage points and how to apply them for maximum success.

  13. Your team lacks accountability or senior management support to reduce costs for the duration of the contract. Unknowingly, many senior managers force telecom departments into quick savings opportunities. According to Steve Shea of Deloitte Consulting, account managers are told never to deal with the voice and telecom managers of a company regarding price and terms negotiation.

  14. Your team has a bias toward the current deal. Since your team was involved in putting the deal together, it will have a personal stake in justifying and defending it. Other telecom executives are forced to justify their current rates rather than focus on ways to improve them.

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