Every enterprise out there is currently under pressure to scrutinise cost line items with a fine-toothed comb as the Covid-19 pandemic has strained budgets around the globe. Telecom and IT budgets, often pertaining to offices that may be getting limited / no use in the short term, are coming into particular focus.
However, cutting networking costs is a difficult task. Early termination fees are hefty (sometimes 100% of total remaining contract value!), and contract terms are long. ISPs make it notoriously difficult process-wise to amend or cancel a contract as well.
If you’re looking to cut telecom or IT spend, I recommend following the steps below.
Step 1: Determine what’s eligible for rebidding
Before properly assessing your company’s cost-cutting potential and optimal strategy, you’ll need to consolidate contracts for all of your telecom, network, software, and IT services (internet access, WAN, phone system, data centre, managed services, SaaS, cloud) to determine what are the biggest cost items, when terms are up (and what is already eligible for renewal), and what contract clauses you may be able to take advantage of.
This is a moment where organised procurement leads to reaping the benefits of their work.
Some end up lucky at this juncture and have a bunch of contracts where terms are up. Awesome. You can get moving on, rebidding those.
If you’re still under contract for some of your services, take this time to analyse the terms of the contracts your company signed. Even if your term isn’t yet up, specific definitions of services, term, effects of a breach, or “force majeure” events can help you find a way out or a path to lower cost with reduced service consumption. For larger and more complex contracts, getting proper legal review will certainly help.
I never recommend starting a dialogue with your ISP / MSP / SaaS provider without a solid understanding of what’s on your contract.
Step 2: Rebid whatever’s eligible!
If you’ve completed your contract term, your cost-cutting journey will be a bit easier. The average cost of bandwidth goes down over time, and ISPs are competing for extra-hard for revenue amid Covid.
I’d recommend looking into Covid-specific promos that network and software providers might be offering, negotiate on EVERYTHING you get, utilise a telecom agent, or take advantage of the web-based services out there that help you compare vendors or request competitive quotes on networking services.
Utilise the difficult moment we’re in to negotiate not just on price but on contract flexibility and other aspects of your service so that you can stay nimble in the future. When you can’t get a break on the price, providers are doling out “free months” of service left and right so they can optically maintain rates.
Remember, you have the most leverage before you sign a contract!
Step 3: Contact service providers around existing contracts
If you’re not able to get out of some of your more important contracts, worry not, as there are still tactics to utilise.
Before contacting providers, determine what it is that you’d like to ask for and what you can offer in exchange. For your objective, perhaps you’d like a payment deferral, a lower monthly rate, or a temporary suspension of service altogether. For the give, perhaps you’re alright with a longer-term, a higher overall revenue commitment, or even participation in a marketing case study. Regardless, it’s important that there are elements of both pushes and pull involved and that the give is adequately framed in the context of the ask. Imagine yourself in the provider’s shoes being asked to give you a break on your contract – what would you need to be delivered in exchange?
This happens to be a moment where strong relationships with your account reps can pay dividends. The person you call is just as important as the ask itself. If you get to someone with even a little power who cares about the account a lot, they may just pull some strings they otherwise wouldn’t. Optimise first for comfort and then for seniority when deciding who to call.
Prior to calling providers, write out a script and frame a story forcing the ask while referencing aspects of your contract that would allow for it (i.e., business issues causing you to utilise a clause in the contract asking for a break, then follow up with your exchange offer). Stick to the script and keep it cordial but be sure to remind the service provider of a potential worst-case scenario – complete loss of business. If you’re an extensive or long-standing customer, be sure to let them know!
Step 4: Optimise for the future
In the exercises performed above, you likely uncovered a few issues in your procurement and contract review process that led to issues when trying to seek flexibility. Let’s avoid these situations in the future.
First, and most importantly, you have all of the power BEFORE you sign a new contract, especially as a first-time buyer. Negotiate flexibility into your contracts! Sometimes paying an incremental cost for contract optionality can be worth it in the future. Be sure to read over specifics on cancellation and early termination fees as well. Perhaps negotiate the ability to push spend into alternative services with the same provider if you’d like additional flexibility.
Second, build relationships with service providers. Know your account manager and thank them for their help if they work hard to win your business. If ever possible, throw them a referral (if deserved, of course) to potentially call on favour in the future.
Finally, information is power in the current market. Channel partners and knowledge resources can be helpful in ensuring you make smart procurement decisions that you hopefully won’t have to revert on. Utilise public data on things like bandwidth pricing to keep yourself informed.
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