Driving a hard bargain

Your company may already have a better than average telecom contract, but chances are you can still do better. Even a small difference in service rates can add up to millions of dollars in savings per year.

If a Fortune 500 manufacturer can save 30% on telecom costs by renegotiating its contract, that same firm would need to increase sales by as much as 10% to achieve the same incremental profit, says Hank Levine, a partner of Levine, Blaszak, Block & Boothby, a law firm in Washington, D.C.

But the best deals aren't necessarily reserved for the largest players. Volume commitment has little to do with the telecom pricing a company receives, according to a study by Deloitte Consulting. In the study, the two companies with the best contract pricing had a minimum annual commitment of around $20 million, while firms with commitments of up to $30 million were among the companies paying the highest overall rates.

No matter the size of your telecom contract, this guide will point out common mistakes to avoid and show you how to get the best possible telecom prices and terms. Good luck negotiating.

Knowledge is power
Before you try to swing a better deal, you've got to know where you stand. There are five ways to measure the competitiveness of a proposed telecom contract. Each method has its limitations, so experts suggest using a combination of tools to cover your bases.

Milestone markers
Unless you just signed a new contract, now is almost always an appropriate time to seek better prices and terms. However, the ideal time to renegotiate varies on how long the contract has been in effect. There are four distinct phases to a contract's life span.

RFP pointers
There are four steps to soliciting and choosing a telecom contract proposal: data collection; request for proposal (RFP) development and issuance; proposal evaluations; and contract negotiations and implementation.

Negotiation tips
Now that you're familiar with the strategy for securing the best possible service and savings, remember to apply these key points whenever you negotiate with carriers.

14 tips
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 here. Once you've identified the problems, take proactive steps to mitigate their effects.

Additional info

Beware binding telco contracts
Are you thinking about yanking your voice traffic off the public telephone network and putting it on your own data network? Do you want to replace your frame relay service with an IP virtual private network (VPN)? Are you preparing to use the 'Net for faxing? Better dust off your telecom contract and check the fine print first. Network World, 3/8/99.

Contracting With Carriers, As Precarious As Ever
By attorney Thomas Croweo.

Telwares
Telecom ontract negotiators.

Wealth in a Decade
Machtig's site.

Cost cutting
These eight tips can help you save big bucks on voice and data telecom service charges. Network World, 3/29/99.

Save money now
Five fundamentals that can help you save thousands in telecom costs. 12/7/99.

Additional info
Links to additional articles and links on saving telecom money.

Machtig is an executive vice president at Telwares, a Destin, Fla., telecom procurement and negotiation services firm. He has authored several best-selling books and special reports, including "How Fortune 500 Companies Can Improve Telecom Contract Prices and Terms." Machtig can be reached at machtig1@ aol.com or (612) 325-9999.