* Signing a longer-term contract may get you a better deal on IP VPN services
Want to get the best deal on IP VPN services? Consider signing a longer-term contract.
That’s what French paper supplier Arjowiggins did recently when it inked a five-year network outsourcing deal with Orange Business Services that is estimated at $18 million. The deal includes data, fixed and mobile voice, PBX, LAN and remote access services for 60 sites worldwide.
“Frankly, we would have preferred three years, but that was part of the negotiations,” says Guy Leonard, senior vice president of the business performance group at Arjowiggins. “That was something we had to give up…to get cost reductions.”
Arjowiggins is reporting double-digit savings in its deal with Orange Business Services, which represents the business communications solutions and services provided by the France Telecom Group. Arjowiggins is consolidating several data and voice networks scattered across its subsidiaries into a single, MPLS-based IP VPN run by Orange Business Services.
“Having one partner in telecom is providing us with very significant immediate savings on our telecom costs,” Leonard says. “Agreements on the evolution of those costs were also part of the deal. Not only do we have cost reduction, we also have cost control.”
Orange Business Services beat out BT and Vanco for the Arjowiggins deal.
“Orange provided the best deal,” Leonard says. “We are having the best solution not only technically but also financially.”
Orange Business Services says it is closing more five-year deals, especially for network outsourcing.
“We need between six to 24 months to transform the infrastructure,” says Michel Picaud, senior vice president of outsourcing with Orange Business Services. “Then we will be in the operational phase.”
Picaud says Orange Business Services can offer lower rates to customers willing to sign five-year contracts.
“By financially engineering the bid over a five-year term, it’s much easier to deliver the savings immediately and keep the overall economics over the long term,” he explains. “To ensure that the prices will remain competitive over the term of the contract, we introduce benchmarking.”
Arjowiggins, whose origins date back to 1469, has 7,800 employees in Europe, South America, the United States and Asia. The company’s annual revenue is around $2.5 billion.
Previously, each of Arjowiggins business units procured its own telecommunications services. The company ended up having many different carriers including the three finalists on its global telecom services bid.
“The desire of the management of Arjowiggins is to make it operate as a group, not be managed with separate businesses,” Leonard says. “We are trying to gain the synergies of being a group wherever we can. Telecom was an obvious one.”
The primary goals of Arjowiggins in signing on with one global telecommunications operator were immediate cost reduction and ongoing cost control.
“When you have telecom [carriers] in a number of different places in a company, you don’t know how much you are spending and you don’t get the same deals as when you negotiate with one provider,” Leonard says.
Arjowiggins also hoped to improve its QoS and network performance of its WAN under its new telecommunications contract.
Arjowiggins selected Orange Business Services in July, and hopes to complete the transition to the new IP VPN by the end of March 2007. Leonard admits that the process of transitioning so many services to one carrier is difficult.
“When we go from multi-operators to one operator, the transition is more painful than expected,” Leonard says.
One novel aspect of the contract is a special R&D credit that Arjowiggins can use to tap the expertise of France Telecom’s global R&D staff. Arjowiggins can bring in engineering expertise from France Telecom to help solve a problem or to work on a new technology at some point over the five-year deal.
“One of the elements we discussed with Orange Business Services is that they commit to keep us at the right level of technology,” Leonard says. “This fund is a good setup because it will give our R&D people an official link to the technology at Orange Business Services.”
Picaud says Orange Business Services is putting an innovation clause in more of its contracts. “With this credit, [our customers] can take advantage of what we are doing in terms of new services and new technologies,” he explains.
