A few companies have found that lesser-known service providers offer cost savings, quicker deployment.
When it comes to selecting a carrier for your network needs, the road less traveled might not be attractive to everyone. But some large companies are finding that going with a service provider that might not be a household name is the right answer for them.
Change is on the agenda for the big interexchange carriers with the upcoming mergers of AT&T and SBC and MCI and Verizon. And that customer uncertainty leaves the door open for service providers that might not be as well known in the U.S. to win big contracts.
In July 2004, Jacobs Engineering Group, a $5 billion global provider of technical, professional and construction services, started looking for a new service provider to handle the company’s global telecom needs.
Michael Miller, senior vice president of IS and CIO at the Pasadena, Calif., company, says many companies responded to his RFP, but he whittled the list down to about 10 and then moved to four. In May, Jacobs selected British Telecom to handle the company’s global telecom needs, which include services throughout the U.S. and overseas. In the past year, BT has been aggressively building out its MPLS network in the U.S. and its customer base in North America.
“We consolidated all of our telecom budget around the world. We had hundreds of contracts from different providers. We are still in the process of getting all of the contracts covered, but BT is consolidating those for us,” Miller says. In addition to providing voice and data services, BT is managing the engineering firm’s contracts with other service providers around the world.
In the RFP, Jacobs stated about eight criteria that all service providers had to meet, and six of those were critical, he says. “BT came the closest to meeting all of those,” he says.
One of the key criteria was to expedite the deployment of circuits, especially in Europe, he says. “They have come through in several instances already,” Miller says. For example, after Jacobs acquired a company in Scotland, it didn’t want to get stuck waiting up to two months for a circuit, which was generally the norm for the firm. BT was able to get circuits to the Scotland site much faster.
“We’re looking for a less-than-two-week turnaround and we’re even willing to pay extra costs that are incurred to do that, assuming the costs aren’t unreasonable,” he says.
Miller also stipulated strict metrics regarding network performance, availability and restoration in case of a network failure, which BT met.
But Miller had some concerns specific to selecting BT, such as BT’s lesser-known presence in the U.S., the carrier’s past debt problems and its reputation as a legacy European telco.
After a closer look, Miller says BT cleared up its $30 billion debt nicely in the past few years. The carrier satisfied his other concerns with strong service-level agreements and agreeing to terms that were important to him, such as expedited circuit delivery requirements.
Miller says Jacobs’ primary goal in issuing its RFP last year was to reduce the company’s telecom costs. Not only is the firm happy with BT’s service and management of its telecom contracts, he’s happy with reduction in telecom costs overall. He wouldn’t say how much he spends, but did say the savings are expected to be substantial. “It’s a valuable deal to us,” he says.
Despite Jacobs’ success, some analysts do not recommend users go with lesser-known providers, or larger providers that might be reselling services in the U.S. as their primary carrier.
“As a rule, I wouldn’t recommend [a lesser-known service provider] simply because in most instances you’ll be able to do better from a pricing and contractual perspective by going directly to a U.S. provider vs. the carrier who is reselling their services,” says Amin Ghossein, senior vice president at Telwares Communications, a telecom contract negotiation firm. “Telwares’ advice is that you can use some of these providers, but would discourage it for your primary needs and use them in a secondary role.”
Another analyst agrees. “If an enterprise is looking at attractive pricing from, say, a Global Crossing, WilTel or Broadwing, one way to bring the carrier through the door is if the enterprise has both carrier and route-diversity requirements,” says Brian Washburn, an analyst at CurrentAnalysis. “If a carrier without a household brand name does an exemplary job maintaining the enterprise’s redundant services, the enterprise can then build up trust and rapport, and hand that carrier more business over time.”
But for Bacardi Limited, a lesser-known company issued an RFP impressive enough to win the deal. The Bermuda company started looking for a new service provider in 2003, says Ron Stan, director of IT at the spirits producer and distributor.
In late January, Bacardi selected Vanco, a U.K. virtual network provider, to deploy its global 37-site MPLS VPN. The deployment is just underway with about five sites up and the rest expected to be online by mid-September.
“We went through a fairly extensive RFP process,” Stan says. The company trimmed down the list based on the responses and completeness of information it received, and brought together a global evaluation team to assist in the process.
Stan says he asked for pricing on a standard set of services for a specific number of sites, so he could get the best apples-to-apples comparison for the bids. “You really need to tell [the service providers] specifically what you want if you want pricing that’s meaningful,” he says. He also requested best pricing in the first round. “I meant best price, and if they didn’t provide that, then they were cut,” Stan says. “We were trying to avoid too many rounds of bids.”
“Talking with references was critical,” Stan says. While customer reference checks didn’t remove any carrier from the running, he says the customer information provided valuable insight that helped in the decision process.
Stan says he was keenly aware of the changing landscape in the telecom market and considered that when making his decision. “We looked at financial stability and ownership structure of each company. It wasn’t just contract negotiations,” he says.
Bacardi didn’t want to go into a situation where there was a merger in progress and ownership was changing hands. Stan says he also paid close attention to ownership clauses that would provide an out if ownership changed hands during the life of the contract.
The fact that Vanco is not very well known initially gave Bacardi reason to pause. “You have to give some thought to a company that’s not a household name. But then you look at their story, numbers, clients and business model, and you come to the conclusion that at one time Microsoft wasn’t a household name either.”
