Written by Dennis Thankachan, founder and CEO of Lightyear
Almost every enterprise out there has been in some form of cost-cutting exercise recently as COVID-19 has strained economic activity around the globe. IT and telecom budgets, often considered cost centres, have been under particular scrutiny.
Unfortunately, IT cost-cutting is difficult – contracts are long and early termination fees often range from 70-100 per cent of the remaining contract value. In addition, ISPs aren’t the friendliest bunch out there.
If you’re reassessing your own telecom and IT services budget, here are some strategies that can help.
What’s even eligible anyway?
This is the moment where organization pays off!
Before you can assess your own cost-cutting potential and plan of action, you’ll want to collect contracts for all of your telecom / IT services (internet access, WAN, phone system, data center, managed services, etc.) and better understand exactly what you’re spending, what’s eligible for renewal, and what contracts give you the opportunity to exit or amend with limited penalty. Look at things in order of absolute spend.
If you have a bunch of contracts where terms are up, great! You can get moving on re-bidding those.
If you’re still under contract for some of your services, better understanding the pieces of paper you signed will be helpful. Even if you can’t exactly terminate your contract, specific definitions of services, term, effects of breach, or “force majeure” events can help you find a way out or a path to reduced consumption at lower cost.
For larger / more important contracts, having legal review could help here. Regardless, I never recommend starting a dialogue with your ISP / MSP without a solid understanding of your contract terms.
Where you can rebid for stuff, rebid!
Wherever you’re out of contract, you’ve got it easy thankfully. Bandwidth pricing is deflationary and telecom providers will compete extra-hard for revenue in the current moment.
Our recommendations would be to take advantage of Covid-specific promos, negotiate wherever you can, potentially utilize 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.
Most importantly, take advantage of the current moment to negotiate not just on price but on contract flexibility so you can stay nimble next time a weak period in demand arises. You have the most leverage before you sign the contract!
Where you’re still in contract, strategize and make calls
Unable to get out of some burdensome contracts? Don’t worry, there are still things to do.
Before begging your providers for a break however, determine what it is that you’d like to ask for and what you can offer in exchange. For the ask, 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 push and pull involved and that the give is framed properly in the context of the ask. You can’t get a favor done without offering something in return!
Before you make any calls, think of a script and storyline forcing the ask (business issues, specific contract clauses you can point to, suggestions for remediation, etc.). Stick to the script and keep it friendly, but be sure to remind the service provider of a potential worst-case scenario – complete loss of business. Utilize whatever leverage you can in the moment, especially if you’re a large or long-standing customer.
This also happens to be a moment where good relationships with solid account managers 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. Optimize first for comfort and then for seniority when deciding who to call.
Learn for the future
It’s during times like these that it’s most important we learn valuable lessons to avoid future issues.
First, and most importantly, you have all of the power when you’re out of contract or a first-time buyer. Negotiate flexibility into your contracts! Sometimes flexibility is more important than price, and paying up for optionality can be worth it depending on the circumstance. Once you’ve signed a contract, there’s little you can do to change things.
Second, build good relationships! 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 a favor in the future.
Finally, information is power in the current market. Solid channel partners and resources (like this blog :)) can be helpful in ensuring you make solid procurement decisions that you hopefully won’t have to revert on. Utilize publically available data on things like bandwidth pricing to keep yourself informed.
About the author:
Dennis Thankachan is the founder and CEO of Lightyear, a web platform that helps businesses comparison shop for network services (dedicated internet access, WAN solutions, VoIP, managed services, etc.). He regularly writes on various IT infrastructure and telecom topics here. Dennis is based in NYC.