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Are Your Contracts Healthy?


Here’s three quick questions that will give you a good indication of whether or not your current carrier agreements are “healthy” or need help (HINT- if it takes you more than 5 minutes to answer these then you probably need help):

1.  Do your contracts have an Annual Spending Commitment such as a MARC or AVC?

2.  Is there an absence of specific language protecting you against discontinued services?

        3.  Does any part of the agreement have Auto Renewal language?

If you answered “YES” to any of these questions then your contract is not leading edge and should, at minimum, be revisited and reevaluated. Here’s why:

• Annual Spending Commitments are carrier traps  to lock you into longer Terms and more spending then is necessary and they reduce your negotiation leverage. We routinely negotiate market leading edge rates, terms and conditions in contracts without having Annual Spending commitments

• Carriers want to move customers to IP, Fiber and Wireless technologies to improve profits and are pressuring customers by discontinuing services. Deregulation by the FCC, in most cases, allows this to happen with as little as 25 day notice. This can wreak havoc on networks and applications that have relied on TDM, wireline and related technologies. Unless you have specific and detailed language in your contract BEFORE this happens you are at the mercy of the carriers’ timeline to migrate services.

• When’s the last time you looked at all your carrier agreements to check on the expiration dates and notice provisions? If there’s Auto Renewal language and you’ve missed the requirement for notice you could be locked into another 1,2 or 3 years with no chance to bring rates, Terms and conditions in line with current market or current internal requirements. There should never be Auto Renewal language in your agreements, but if there is, don’t wait- check it now!

One of the most common fallacies out there is that you must wait until you’re nearing expiration in order to revisit or renegotiate these carrier agreements. Not true. In the same way that you don’t wait 15 or 30 years to refinance your mortgage agreement if current interest rates are more advantageous, you shouldn’t wait to take advantage of current/better telecom carrier rates. We regularly are successful in addressing contract deficiencies in contracts that are as recent as 6 months old.

There are many other factors that can also determine whether or not a contract is “healthy”. Certainly, Rates and Pricing are also an importatn component.  Part of our approach at Silver Lining Telecom is to provide a free detailed contract and spend analysis to let you know exactly where you stand relative to the current market. Feel free to reach out to us for this free analysis if you’d like to find out if your contracts are “healthy”.

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Posted by on in Silver Lining Telecom
Doing the Budget Boogie?

Recently, I was talking to a friend and colleague who was stressed out because he was working on budgets for next year.He’s an IT/Telecom executive at a large corporation, and he was under pressure to reduce expenses but didn’t know where he could realistically make cuts without compromising vital services or projects.As we talked, it became clear that he felt he had no choice but to simply show projected reductions in hardware, software and ongoing telecom expenses that may or may not happen and then simply hope for the best outcome next year.

We joked about him doing the “Budget Boogie” as I told him that his approach reminded me of the lyric to a song by a band we both like named Little Feat.The song’s title is “Old Folks Boogie,” and the lyric goes like this, “And you know that you're over the hill when your mind makes a promise that your body can't fill.” 

Normally, I would have offered to help since my company specializes in reducing Telecom spending, but we had recently completed a project for his firm and knew there wasn't much room for further reductions. I did give him some “pointers” that would help to further manage the company's wireless expenses, but I knew these would result in relatively small additional savings.

Now, with this being that time of year for finalizing annual budgets, I'm wondering how many other managers and executives are out there dealing with the same type of concerns and pressures and doing their own version of the “Budget Boogie?”  I’d like to know if you or others you know have found yourselves in this situation.  Of course, my firm would be “Willin” to help in any way possible.



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Posted by on in Silver Lining Telecom
A Horror Story


We recently worked on a Telecom Expense Management and cost reduction project for a client that was having significant problems with one of the major carriers.  The problems centered on billing and implementation issues that, frustratingly for the client, had been going on for over 2 years.  They were at their wits end and asked if we could help.  As we dug into the background of this situation here’s what we found:

  • The original contract was poorly written and even more poorly negotiated by someone inexperienced in the details and nuances of telecom carrier agreements.  As an example, it included a Minimum Annual Revenue Commitment that was almost 100% of the then current spending.  Also, the rates were significantly above market for that point in time.  While it looked like they would be saving money because the new rates were lower than their previous rates, they left a lot of money “on the table”.
  • Implementation of the contract required a migration of services from other carriers.  No ramp up provisions were included and there were no meaningful (i.e. with remedies) implementation SLA’s. 
  • The carrier Account Team was inexperienced and either inept, indifferent or both.  As a result, the client got little or no helpful support or problem resolution.
  • This “The Perfect Storm” of bad circumstances for the customer led to the following results:
  • Because the spending commitment was too high and the implementation took too long they were in underutilization default within the first 6 months of the agreement.  Rather than the carrier admitting that they had knowingly over-committed this customer, the carrier’s solution was to reduce the underutilization penalty and add a year to the contract term! This is almost never the right solution in this type of situation as it merely extends and compounds the problems.
  • The migration nightmare not only meant interruptions in service but also resulted in almost all of the services being put on the wrong contract rates or wrong billing platform i.e. rates were  higher than those that were agreed to in the new contract.  The client expended a great deal of time and resources to try and straighten out the billing mess but was having very little success.
  • After 12 months of problems, the only thing that changed on the account team was that a new (even less experienced) account rep was brought on board and she had to try and understand all that had happened previously.

We dug into the billing and the contract in great detail while also establishing communications with the account team.  We advised the client of the “good news/bad news” scenario. 

The bad news was that they had hit the “trifecta” (bad contract, bad implementation and bad account team) of carrier service elements resulting in their own “Perfect Storm” of troubles.  In our experience, if any one of these items is a problem they can usually be overcome by the other two.  For example, a bad contract can be overcome by a strong account team that works to ensure a smooth implementation.  But when all three aspects go bad, the customer is in for a rough ride!

The good news is that we knew how to address and fix their problems.  Here’s what we did:

  • We set up weekly calls with the account team to track issues, progress and resolution.In addition, because of our carrier contacts, we were able to escalate the issues to a Senior Executive at the carrier to cut through red tape and get things done quickly.

  • We migrated all of the accounts (over 1100 voice accounts alone!) to a new account on the proper billing platform.

  • Our detailed audit found over $126,000 in both one-time and monthly recurring billing errors that are being credited and corrected.

  • We’ve positioned the customer to conduct a sourcing RFP for these services in the near future.With our sourcing and negotiation help, they’ll be assured of getting market leading edge rates terms and conditions.

The moral of the story is that customers can avoid the danger, disaster and drama of their own “Perfect Storm” by making sure they do the following:

Be well prepared for contract negotiations by fully understanding your detailed demand set and having an in-depth understanding of the current market.It is almost impossible to have this knowledge in-house.Third-party consulting firms like Silver Lining Telecom will perform a current market benchmarking analysis for you at no cost and with no obligation. Why not take advantage of them?

  • Perform periodic billing audits to ensure accuracy and contract compliance.Carrier billing systems are extremely complex and even if billing starts out correctly new orders, software updates and human error can all contribute to incorrect invoices.
  • Demand accountability from you carrier account teams.Also, establish and maintain communications not just with your Account Manager but also with Senior Execs several levels above the account team. There’s typically a lot of management involvement when the carrier is trying to win your business but it frequently disappears once the contract is signed.Don’t let this happen.

If you take these steps before there are problems, you will avoid a lot of headaches and have a better chance to ensure “smooth sailing”

Tagged in: telecome expense
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