* Who has the upperhand in WAN service provider contract negotiations?
Today, we continue our discussion of the types of IT initiatives that will be popular in 2009. The last two newsletters on this topic discussed cutting WAN costs by moving to MPLS and by renegotiating with your WAN service provider. Today we’ll continue our focus on renegotiating contracts.
We suggested that if your contract with your WAN provider is within a year or so of expiring that’s a good time to renegotiate with the goal of reducing cost. There are some general guidelines, but there are few hard and fast rules. For example, IT organizations tend to get lower prices the more revenue they commit to their service provider. However, that is a tendency and not a hard and fast rule. We have seen many instances in which a company with a relatively low revenue commitment received better pricing than a company that made a higher commitment. Similarly, IT organizations tend to get lower prices if they sign a five-year contract than signing a three-year deal. Again, this is a tendency and not a hard and fast rule.
One hard and fast rule is that if you have no leverage, you will not benefit from the negotiations. As we mentioned, when negotiating with your WAN service provider, one of their primary goals is to keep you as a customer. If, for whatever reason, it is not possible for you to shift suppliers – and your current service provider knows this – you have absolutely no leverage and your organization will not benefit from the negotiations. Conversely, if you can convince your provider that you are willing to shift all or a substantial portion of your WAN traffic to another provider, then you are in position to benefit from the negotiations.
Next time, we’ll continue this thread by looking at how the current economy will impact the IT enterprise. In the meantime, we would like to hear from you. What type of IT initiatives will be getting the most attention inside of your organization in 2009?
