Tips from an industry insider: Paying Microsoft more than you should? How to negotiate the best price.

Are you paying Microsoft more than you should be?Microsoft makes it difficult not to.  

You pay a premium at the point of purchase

Microsoft's pricing structures are intentionally complex and opaque. Some list prices (Microsoft calls them "ERP" – Estimated Retail Price) are published. It's possible to get competitive reseller quotes for volume licensing programs such as Open and Select Plus, but Microsoft does not publish pricing for the direct-with-Microsoft agreements such as Enterprise Agreements.  Optelcon create an inventory of your licenses and help determine the best structure which gets you the most for your investment. 

So, how do you know if you paying a fair market price?Even though it insists it doesn't, Microsoft does negotiate its prices. Sometimes to levels well below what a typical customer sees.  The only way you will know what others are paying, is to work with a company like Optelcon. Our current market pricing database of deals negotiated, RFP's and analysis will provide you with evidence-backed data to make sure you are not paying more than your competitors?

When was the last time you renegotiated your Microsoft licensing agreements?
In any dynamic organization, things change. License consumption, new products, new releases, cloud solutions, IT infrastructure etc...
Microsoft continues to restructure and update their  product lines. Microsoft is constantly adding and removing product from their licensing bundles, revising usage terms.
The fact is, few companies are perfectly aligned with Microsoft's release cycles; it's well known that most tend to lag a cycle or two behind.

Are you running the latest releases and "The Full Stack".
Ironically, companies who are less reliant on Microsoft products the customers tend to pay less than those who are most heavily invested in the Microsoft technology "stack".  The more committed a company is to the Microsoft product set, the more difficult it is to switch vendors. You better believe Microsoft uses to their advantage.  If Microsoft believes your company is a "Captive Audience", what incentive does Microsoft have to provide the most aggressive discounts?

How does your company navigate through these challenges? 
Saving money with Microsoft is not easy.  Without a deep understanding of their selling rules and are armed with real market data, you will be hard pressed to get the best terms and pricing. 

Tips from an industry insider: Mobile Device Management "MDM" 101

Mobile Device Management "MDM" 101

MDM softwareAmong the hundreds of MDM companies, fortunately, there are really only a few vendors that make up the large majority of actual sales in the market.  The major players in this space include: Air Watch, Mobile Iron, Box Tone, Good Technology, Emobius or Zenprise. 

Does RIM still matter?RIM released their own MDM software, Fuse, which will essentially extend BES' capabilities to become multi-OS. Analysts and critics question RIM's motivations in offering MDM software, since it may erode the market share of their own Blackberry's, making adoption of non-RIM devices that much easier in any given company. This will be a very attractive offering for many buyers, since it will be provided at no cost.

GUI or Compartmentalize?
Also referred to as a "secure container" approach, this method requires replacing the device's native applications for email, calendar, and contact lists. This means that iPhone users, for example, would not be able to use the Apple email application that comes with the device. This approach is very secure because the corporate data exists only within the sandbox application itself. Very specific security policies and practices can be implemented. For example, specific encryption methods can be used. The sandbox approach may not sit well with users, since the major reason that they want to use an iPhone is for its impressive user interface. Good Technology is one of the most prominent examples of MDM software that uses this approach, and if your security policies require you to use the sandbox approach, then your decision is easy, as Good is the only vendor in the shortlist. Most other MDM software preserves the native user experience of the device itself. The user is able to securely use the default email, calendar and contact applications built into the device operating system. Since the device's user interface remains the same, employees tend to prefer this.

Technical Criteria
There are many important technical factors to consider when deciding which MDM provider(s) will be a good fit for your company including:

• Are you planning on supporting specific tablet and Smartphone operating systems; if so which ones?
• Are you looking for a solution that you can host within your corporate network?
• Are you interested in a product that can be run within a virtual machine or within a hard appliance?
• If virtual machines are preferred, what type of visualization infrastructure do you currently use?
• Will you be supporting users who bring personal devices into the corporate network?
• Will these users be subject to different security policies than those using corporately owned devices?
• What system are you currently using for corporate email, calendar and contacts? For example every solution offers varying support for Microsoft Exchange, Lotus Notes Traveler, etc. The version(s) you are currently running may also affect the functionality. For example Microsoft Exchange 2007 allows for differing functionality within some MDM product than Microsoft Exchange 2003.
• Are you planning a transition from a locally hosted email system to something cloud based? If so which service are you considering? Some MDM services support cloud based email systems, others do not.
• Does your current IT disaster recovery policy affect the installation of an MDM service?
• Are you intending to use your MDM software to distribute applications to your users?
• Are you planning to use commercial applications, or custom ones? Which operating systems will you develop for?
• Are you currently making use of, or do you have plans to use, certificate based authentication within your network? Which services would you like to authenticate in this manner?
• Would you like to allow your users to register their own devices?
• Are there any government regulations that you are subject to? How do these regulations impact mobile devices and MDM?
• How technical is your user base? If your organization is composed of a more technical group you may benefit from having fewer calls to tech support. More technical users may also be more likely to intentionally subvert security policies. Conversely less technical users may require more technical support and may not fully understand the security risks associated with mobile devices. Differing MDM providers are more suited to differing technical levels of users.
• How many total users will make use of the MDM service you choose? Differences in volume pricing and ability to support various user group sizes will impact your MDM decision.
• Do you intend to administer your own MDM software? Professionally administrated MDM software is available from some providers?
• Do you have other internal or external processes involving mobile device procurement or management which will be affected by your introduction of an MDM service?
• Do these teams have the ability to handle the changes in their process required by some MDM services?
• Are you interested in an MDM software as subscription or perpetually licensed software?

What about pricing?
The cost of MDM software varies greatly, generally depending on amount of functionality, hosting options, and the quantity of licenses purchased. In general you can expect to pay $20-$75 per seat for a perpetual license, or $1.50 to $3.50 per seat for a monthly subscription service. Additional fees will also apply for ongoing software maintenance/support, installation services, and training. Pricing is currently fluctuating, as the market grows. Generally, pricing is higher for vendors that offer the most functionality, and that are most favored among buyers. Between the vendors on our shortlist, there are some differences in price; however, it depends on your specific requirements and volume.

What Should I Expect From Installation?
Most MDM software relies on server-side software which acts as a central hub for mobile device communication with other services within the corporate network. The installation of an MDM product can be very complex. Integration with existing network services will need to be established and properly tested; this will require involvement from your IT department.
We've been seen several failed MDM projects. The software was not properly installed or tested. The software may have been an appropriate choice; however, the attention required on installation was not adequate.
As is the case for other network software, professional installation practices, including step-by-step installation checklists should be followed.

Top reasons why MDM systems do not live up to expectation or fail. (Hint... It's not the software):

•  Lack of clear objectives for MDM. 
• Implementation. Lack of a good road map and plan for implementation can spell disaster. Have you taken into consideration all of the considerations above? If so, how are you planning to mitigate these risks,
• Training. Without proper companywide training, the solution will not live up to expectation. It will actually generate more calls into your IT help desk.
• Lack of communication with employees. Employees are going to be concerned about big brother and need to feel comfortable that their personal data will remain personal.
• Implementation - How the applications are rolled out to users is important. Also, making sure that the right settings are in place. We suggest a small sample group to make sure the systems, processes and setting are working correctly before rolling it out to a wider audience.
• On-going management. Everyone likes their shiny new MDM toy, but it requires daily monitoring and management. Mobile is a dynamic environment. Without the right vigilant resources managing the administration and escalations, you will not get all you paid for.
• Carrier management. Identifying people who are abusing the phones is one thing. Fixing it is another. Your people should have the required skills to comfortably interface with each carrier's billing portals to make changes to individual accounts.

There are many benefits to MDM software, however given how dynamic mobile is within a large organization, do not underestimate the cost of maintaining it. To make it work as advertised "the devil is definitely in the details".  If you are considering rolling out MDM to a large user group, we highly recommend a phased approach starting with a small user test group to work out all the kinks prior to releasing it corporate wide. Most MDM companies 

 Like any software solution, it's only as good as data you put in and how vigilant you are at managing it. 

Thinking of secondary market phones? How to buy and what to avoid.

There are two routes your company can go when looking to purchase phones for your employees.  You can go through the normal carrier 

process which requires multi-year contracts, long wait times to upgrade, high deductibles for broken or lost phones, early termination liabilities "ETL".   The other way is through the secondary market.  Many companies do not realize that there is a very large market for refurbish devices on the secondary market.  

The secondary market can be a great alternative for low cost, contract free devices. New releases of popular handsets ensure availability and attractive pricing for previous releases of these same devices on the secondary market.

There are a few things you need to know and some pitfalls to avoid when buying on the secondary market:

Device Grades

• Grade A: Grade "A" should deliver a device that appears like new.
• Grade B: Grade "B" allows for moderate surface scratches etc.

What comes with the phones?

When ordering from a supplier make sure you specify what comes with the device.  The final price of the device will be determined by whats included.  If you get a "too good to be price", they will send you a phone and battery and nothing else.   You need to specify the things included:

Accessories.

• Battery
• Power cord - Ask if it is a factory unit or a Chinese produced replacement  (The Chinese produced unit will save you about $10/unit)
• Factory box
• Factory instructions
• Factory ear bud head phones. 

Best Practices

Standardize on a device that is extremely popular in the market place and appears to offer longevity. This will help ensure reorder availability and price competitiveness in the secondary market. The Apple iPhone current falls into this category but, the Samsung Galaxy S will follow suit as they are following the same new release structure as Apple.

• Order in bulk.  If you know your going to need 200 or 500 phones in then next 3 months, order them all at once to negotiate a better price.
• Get an extended warranty.  If you order in bulk you can negotiate and extend the warranty period. 
• Get the most current software release.  If you do not specify this, you will get a variety of releases.  If you specify this in your agreement you will save a lot of time having to update devices.
• Unlocked phones.  Be sure to request that the supplier provides unlocked devices.  This will allow you to use the phones on different carriers for flexibility. 
• Specify the carriers you want to use the phones with.  Each carrier operates on different platforms.  An Sprint Iphone will not work on Verizon's network etc..
• Testing - Specify that the supplier provides tested devices.  Have your vendor test the camera, switches and primary features. 
• Return policy - Make sure your agreement specifies that if a device does not meet your criteria or is not working they will provide a free replacement and pay for shipping. 
• Accessories - be sure to specify the accessories that come with the phone.  Battery, power cords, original box, instructions etc...
• Reputable supplier - make sure to ask the vendor how long they have been in business, how many clients and phones do they sell and ask for a few references. 

If you go this route, order a quantity of cold SIM cards from your carrier.  They can be inserted into the phones and will be come active when the phone is used.  

In summary, there are many benefits to ordering on the secondary market.

• Price- You can purchase an A grade Iphone 4s and Samsung Galaxy S3 for approximately $135-$175 depending on accessories.
• Flexibility - By getting an unlocked device, you can use it on more than one network.
• Reduced carrier costs and no contract pricing. Since the carrier is not subsidizing a $600-800 device, You can get a month to month plan from your carrier for less money and no ETLs.

The downsides are very small if you follow the best practices above or work with a company that has experience working with various secondary market suppliers.

Tips from an industry insider: If you can't answer the following questions, you're NOT ready for BYOD.

BYOD consulting and transformation.

To BYOD or not to BYOD? That is the question. Optelcon can help your company evaluate the pros and cons of going to a BYOD environment. We also provide processes and tools which keep your data secure, your costs lower and automate the switching process.

There are 4 options when it comes to how companies manage their mobile devices.
1.Complete corporate ownership.
2.Corporate owned with payroll deductions.
2.Complete BYOD strategy.
3.Hybrid.

Every company is different. What works for some companies may not work with others. There are a myriad of issues, challenges and landmines in any strategy.

Some of these issues include:
• Who owns the phone number; the company or individual?
• Security. How will you keep your company data safe in a BYOD or Corp environment?
• Privacy issues related to an employee's personal data.
• E-Discovery. In either environment , are you compliant with recent rulings and regulations?
• Devices. Are you going to buy the devices for your employees or let them purchase them separately?
• Cost. How are you going to determine a fair expense reimbursement?
• How are you going to reimburse your employee? Expense report/expense check, P-Card?
• Taxes. What are the tax implications of employees who receive money for their phones?
• Transition. When moving from one environment to another, how do you implement the new program without disruption of service?
• Carrier considerations – What is the process to change who is now liable for charges?
• Rate Plans & Pools – What will happen to your pool structure if you move large numbers of users to a BYOD environment?
• Contractual – How will any transition impact your current contract, commitments, discounts etc...?
• Policy – Who is going to write the corporate policy and what should be in it?
• Project Management – How is your already stretched IT staff going to manage any transitions?
• Political and personnel issues – How are you going to deal with employees who do not want to either transfer the phone to the company or from the company to the individual?

The key is having established tools, policies, processes and the people who can make a transition go smoothly without taxing your IT staff, or create employee rebellions.  You don't need to re-invent the wheel.

Tips from an industry insider: When is the best time to renegotiate your telecom, mobile and IT contracts?

Mid-Term Re-negotiations.

(If you're not renegotiating every 12-18 months, you could be losing millions in opportunity cost).

Due to the constant drop each year in telecom, mobile and IT cost, if you're not renegotiating your contracts at least every 12 -18 months, you could be paying more than 25-35% more than market and leaving millions on the table.
The most common objections we hear from prospective clients is. "We are in the middle of a contract and can't touch it". Or "We are going to put together an RFP as we get closer to the end of the agreement". Most companies do not realize that most contracts can be renegotiated well before the end of the term.

There is formula that can identify the most optimal time to renegotiate early. The variables include the term, cost per unit of your existing services and the current market pricing at any point during the term of your agreement.  As a simple example, in the graph above, we assumes a 20% year over year decrease in costs. In this example, 18 months into this 36 month agreement is the most optimal time to renegotiate. At this point, the client will save over $1.4M compared to staying with their existing contract pricing and terms. This ratio will be different for each deal. It depends on the services covered; the market conditions contract terms and corporate objectives.

Your corporate objectives play a big role in determining the right time to renegotiate mid-term. The timing may not save you the most; however your quarterly numbers need a boost. In this case you may want to accelerate the renegotiates early to hit your numbers. Vendor leverage and commitments also play a factor. How much you have spent relative to either a MARC "Minimum Annual Revenue Commitment" or MTRC "Minimum Term Revenue Commitment" also plays a big part in our leverage assessment. There are many factors why vendors will come back to the table early. Some include the desire to extend the term, add new business to the account, or a fear of lost business.

Other factor includes present value of money and opportunity costs. Depending on the curve, if you wait 6 months to pick up an extra 20%, the amount of money left on the table waiting may not justify the wait.  While not every situation is ideal for mid-term negotiations, in our experience we find that over 98% are.

Tips from an industry insider: What every CIO, CFO and CEO needs to know about how cloud storage.

Back in 1988, I worked for Apple Computer in their college development program. I remember my ugly beige Macintosh box with that funky greenish screen. The computer had very little storage, so I went and purchased an external hard drive. It was a whole 20 Megabytes! It cost a fortune.  It weighed about 5 pounds, was a foot long, 6 inches wide and 6 inches tall. How things have changed.

Today, physical hard drive demand is actually dropping yet cloud based storage is one of the fastest growing IT sectors. According to Gartner, the public cloud services market is forecast to grow 18.5 percent in 2013 to total $131 billion worldwide, up from $111 billion in 2012, according to Gartner, Inc. Infrastructure as a service (IaaS), including cloud compute, storage and print services, continued as the fastest-growing segment of the market, growing 42.4 percent in 2012 to $6.1 billion and expected to grow 47.3 percent in 2013 to $9 billion.

Whether or not you realize it, cloud storage has already gained a foothold in your business. How and where your corporate data is stored and accessed has a dramatic impact on productivity, security and cost. More and more employees are using cloud-file sharing services like Drop box, Icloud, Google Drive, Sky drive and others for work. The largest driver behind this incredible growth is the rapid adoption of smart phones and tablets. The value is undeniable. The need to have your data accessible from any device anywhere has become a necessity. In order to deal with this paradigm shift, IT, vendors and marketers are responding in kind with new tools, such as IDaaS, SaaS and EUC platforms. If you've never heard of those terms or you don't know the difference between SoMoClo and SoLoMo, you're not alone.

Here is a high level explanation of what these terms are.

IDaaS
Identity as a Service is a kind of single sign-on for the cloud. It's an authentication infrastructure that a third-party service provider builds, hosts and manages. Usually, companies buy IDaaS as a subscription service. For an additional fee, cloud file-sharing service providers sometimes also host apps and give subscribers role-based access to certain apps or virtual desktops through a secure portal. For corporate IT, a secure solution is a must. Unless secure and approved, commercial services must be avoided and locked down like the plague.
As an example, you have probably seen websites that allow you to login using your Facebook, Twitter, Google and other accounts. This gives the user the ease of having to remember one password. Be very careful with this. When you select one of these options, Google or Facebook will ask your permission to give access to the service you are signing up for. When they ask, they typically tell you what the new services is requesting access to and what they can use it for. To mine data, many companies request access to all of your information, your contacts, your posts, your emails, your friends and basically all of your personal data. The next time you use one of these commercial identity as a service's IDaaS, think of what is shared. Once you give another service access to your personal, corporate and social data, it is hard to put the Genie back in the bottle. From a corporate IT perspective, policies should be set and measures should be taken to prevent the use of unsecure IDaaS services.

EUC platform
Vendors use the term "end user computing" platform to explain to customers how and why businesses should bring desktop and application services together. EUC platforms deliver services in a way that leaves users unaware of whether the service is managed locally or in the cloud.

Cloudware
Software that runs on a remote Web server -- as opposed to on a mobile device, PC or an on-premises server -- is known as "cloudware." Using this delivery model lets users subscribe to an app instead of buying it, so employees will always have the most recent version of that application. A few simple examples are Google Docs and Office 365. These applications can be access from the web.

Cloud storage
Cloud storage is a service model where data is managed, backed up remotely and delivered to users over the Internet. There are three main types of cloud storage models: public, private and hybrid. Public storage providers include, Dropbox, Google drive, Icloud, Sky drive and others. Private storage providers include, VMware, Oracle, Nirvanix, Savvis and others. Hybrid storage providers include, Ctera, Sharefile.com, Tegile, Nirvanix and others.

Community cloud
when several organizations with common computing interests -- such as regulatory compliance and performance requirements -- share a multi-tenant infrastructure, it's known as a "community cloud." Such clouds let organizations reap the benefits of the public cloud, but with the added privacy and security of a private cloud. Participating businesses can administer the community cloud, or choose to leave that up to a third-party managed service provider.

BYOA
"Bring your own app" is the name given to employees' use of cloud services and third-party applications in the enterprise. Employees bring their own devices to work, so it's only natural that they also would bring their own applications. Allowing BYOA can increase employee productivity and satisfaction, but when consumer technology accesses the corporate network and stores company data outside the data center, it raises security concerns. If an employee loses his device or it's stolen, administrators can wipe it. But if that user has stored data in the cloud, the options are very limited for protecting that data from theft or breach of the cloud environment. Examples of this are Drop Box, Box, Icloud, Google Drive, Sky drive and SharePoint. If you have a smart phone, changes are you are already using one of these solutions. These services represent the largest threat to keeping your corporate data secure.

SoMoClo
The amalgam of 'social," "mobile" and "cloud" technologies, SoMoClo allows users to access their data and applications anytime and from anywhere. For IT, SoMoClo is an employee-driven movement that means data and apps can live almost anywhere, can be accessed from limitless endpoints and can be shared easily. Companies like Facebook have really been a big driver in this area. Linking your social data with other apps and other files is convenient, but has its risks.

SoLoMo
Not to be confused with SoMoClo, SoLoMo is the convergence of "social collaboration," "location" and "mobile" technologies, and is something that marketers commonly use. SoLoMo let advertisers -- such as Foursquare, AroundMe and Yelp -- push notifications to customers who are physically nearby, using gamification to keep potential customers engaged. SoLoMo is also emerging in search engines as a way to give users location-based results.

How can this transform your business?  Imagine a scenario where a company creates a database of their competitor's employees from LinkedIn profiles and who their connected to. GPS data on competitor's employees can be bought from any number of online apps or social sites that they give phone location access to.  From this data, a company could determine which of their competitor's customers haven't been visited for 6 months or more and "go knocking".  A company could predict possible mergers by determining if the competitor's Sr. executives, lawyers or accountants are spending a lot of time at another competitor's offices.  Depending on whether you're the data "miner" or "minee", this can have dramatic impact on your business. Used properly, this type of data mining could dramatically increase sales.  If your company is not taking measures however to protect your data, this could be very damaging to your business.  Cell phones are one of the lynch pins to this risk. If you do not have the right mobile policies and security in place, you could be exposing your company to more risk than you could imagine. Your competitors don't have to hack anything. They just need to buy the right data and query the right questions. The scary thing is that you won't know about it until you see your customers disappearing.  

As a C level executive, or corporate IT manager, new strategies need to be implemented to take advantage of this data and minimize your company's exposure.

SaaS
Software as a Service is a software distribution model where vendors or service providers host applications and make them available to customers over the Web. There are two general kinds of SaaS. In the hosted application-management model, a provider hosts commercially available software and delivers it over the Internet. In the software on-demand model, the provider offers customers Internet access to one copy of an app that was created for SaaS distribution. SaaS simplifies administration, patching and application version management for IT pros.

Hybrid cloud
A hybrid cloud is composed of at least one public cloud and at least one private cloud. A hybrid cloud is a cloud environment through which an organization offers and manages some resources internally and contracts others from external providers. For example, a company might use a public cloud service to archive data, but still use an on-premises storage system for customer data. This is quickly becoming the trend for Companies looking to keep the benefits of cloud storage and protecting sensitive data.

The cloud is here to stay. Understanding the different flavors, the benefits and the risks are the first step toward creating the right strategy. If done right, cloud storage and social data mining can give your company a competitive edge. If not, cloud storage could be catastrophic to your business.

Tips from an industry insider: Is Your Company A Victim Of "Telecom Extortion?" A Negotiating Tip From A Telecom Industry Insider.

Every day I hear clients say they that they feel they should wait 2 years before they can start renegotiating a new 3 year telecom contract.

This can be a very costly mistake. For large enterprise data networks, it is imperative to start the data gathering and preparation for the negotiating process at least 12-18 months into a 3 year deal. If your company does not have a viable alternative in place to use as leverage by at least 12 months before your current contract expiration, your carrier may have already won. Carriers will only react to either the promise of more business or the threat of losing of business. The bigger you are, the worse it is. If you are a large company, it can take upwards of 8-12 months to move to another carrier. Your carrier knows this. Collecting requirements, putting together RFPs or RFQs can take 2-5 months. The bigger the company, the longer it takes to gather the necessary data. Now there is only 7-8 months until contract expiration. Even though other vendors are offering a 30% reduction, your incumbent will typically offer a nominal 5-7% discount for a 3 year renewal. Upon showing the incumbent how much savings could be achieved by moving vendors, they will most likely play the "partner card" and start working on a better proposal. If it is one of the "Big Two" carriers, they are experts at stalling. They can easily delay proposals for 2-3 months while they "get special pricing approval and run it through finance and engineering" a half dozen times. Now there is only 6 months remaining until expiration. At this point, your incumbent has all the leverage.

Have you ever noticed that the big two's carrier's contracts are structured in such a way as to provide a 85-95% discount off their standard rates where other carriers will quote a fixed rate? Say what they will, but this is how vendors turn into professional extortionists. No broken limbs, but extortionists just the same. With only 4-5 months left, your incumbent will come back with a new 3 year renewal proposal offering a slightly better 10-15% discount off of their current rates. Remember, much of the telecom market has been experiencing 12-25% year over year, CAGR price decreases. By the end of your first 3 year term, it is likely that market prices have already dropped over 30%. They will also continue to do so for the next 3 years. At this point, there may be one final push to get your incumbent to lower their rates. The incumbent will say no. Why would they lower their margin when they have all the leverage? To buy some extra negotiating time and be in a better negotiating position, some will ask for a 1 year contract extension instead of a 3 year extension.

This is where the extortion comes in. In a polite way, your incumbent will tell you to either sign the deal on the table, "or else" rates will go up 10 fold when the 90% discounts disappear when the contract expires. When this happens, their are very few options other than to renew for another 3 years and be stuck paying 30-50% over the pricing that even smaller companies enjoy. This reduces your company's competitive cost advantages.

There are a number of ways to mitigate these risks however; I will save that for another post.

Tips from an industry insider: Negotiating Strategies Your Vendors Do NOT want you to know about.

How to create a winning contract negotiating strategy and avoid the telecom contract "Hotel California".

Your company is massive; you spend millions of dollars on telecom. You have a team of Harvard MBAs and Lawyers running your procurement operations. You have run extensive RFP's. You've consulted Gartner. You've had 9 rounds of negotiations. Finally, when you vendor says "this is the best we can do or we will have to walk", you sign that 3 year, multi-million dollar commitment and feel good about it.

Your carrier installs your data network and provides a myriad of management services to make sure everything runs right. They run your firewalls and manage your routers. They provide complex and feature rich 800 services to your call center. They find all sorts of ways to sell you more services and make your life easier. They have now become an integral part of your business. When they have sold you all they can, you now just transitioned from being a "prospect to a customer". You have now fully checked into the telecom, Hotel California and things seem great. 

Renewal Time

"You can check out any time, but you can never leave"

If you are a smaller company with less complex services, it is pretty easy to change vendors. Your vendor knows this. This business is very vulnerable to loss, forcing the carrier to be ultra-competitive every year.

If you are a large multi-location or global customer, changing vendors is neither easy nor cheap. Your vendor also knows this.

This is where the door to the exit starts to disappear.

In the telecom market, pricing has always been a constant state of decline. When you're a prospect, you will likely get great market pricing. You're now locked in for 3 years at that price. As the years go on though, the rest of the market is dropping at a rate of approximately 20%/year. By the 3rd year, you are likely to be paying as much as 40% more than what your smaller competitors are paying. Now, all that money you spend on all those integrated services, have now just become a huge disadvantage at the negotiating table. The bigger you are the worse it is.

Example of rate decline relative to your spend.

	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Price of Service You Committed 3 Yr Deal	$100	$100	$100	$100	$100	$100
Incumbent 3 Year Renewal Offer				$80	$80	$80
Current Market Price with 20% Annual Market Drop	$100	$80	$64	$51.20	$40.96	$32.77
Amount Of Over Spend Relative to Market	$0	$20	$36	$28	$39.04	$47.23
Percentage of Overspend To Market Ratio	0%	20%	36%	36%	49%	59%

This table represents how long term contracts will reduce your competitiveness over time. In year 4, this assumes your incumbent gives you an additional 20% discount to keep you happy and renew for another 3 years.  With out the right strategy and leverage, you will never get to the best market rates and thus will not be as competitive. 

There are only two reasons why a carrier will reduce a customer's rates or provide better terms.

1. The promise of new business. (Now your back to being a prospect again; well sort of).  Every new business deal should stand on its own merit.  Avoid letting the carrier make new revenue as condition of a better deal.  
2. The fear of losing business.  It costs 20X as much to gain a new customer as it is to keep an existing one.
   1. From your account teams perspective, fear of losing a marquee customer and upward mobility. What sales team wants to be recognized by the "C Suite" as the ones who blew a $100M deal?
   2. Fear of compensation loss. Due to your size, you are probably the only or one of a few large customers your sales team is responsible for. The loss of your account has a much bigger impact on your sales team compensation than one with dozens of smaller clients.  Remember, your not negotiating with your sales team, your negotiating with their finance team. "Get your account team to work for you instead of against you".  If you position it correctly, your sales team will start negotiating with their finance team on your behalf.

Instead of letting your vendor plays off your fear of moving, flip the table. Remember, your carrier has much more to lose than you do.

How do carriers calculate what they are going to offer you on your next 3 year renewal?
Carriers' factor in the cost of moving, the customer's corporate politics (Do the Carrier and your company's CEO share a board seat? etc...) and most importantly, the fear factor. Contract improvements, are based almost solely on your carrier's perception of your appetite and ability to change. This determines how vulnerable your business is to them. This means everything at the negotiating table.

How to flip the tables and give your company the upper hand?

1. Be Prepared to Walk.
   Your entire procurement and exec team all need to be feel comfortable that you can switch vendors without summoning the 4 horsemen. Any wavering or mixed messages and your vendor will know it. Large companies switch vendors all the time.  It may seem imposing, but with the right resources and plan, you can change vendors without bringing your business to a halt. The vast majority of telecom services today have been largely commoditized.  If you don't truly believe that, then that exit door just disappeared. Take all the emotion out of it. You have got to be prepared to walk away from the table.
2. Start Early
   Make sure you start negotiating early enough. The bigger you are, the early you should start. Start the process at least a year before the end of your contract. If you start negotiating when there is only 6 months left on the contract, your carrier just got the upper hand in a big way. Moving a major network can take 6 month. Your carrier knows this.  By the time you have 6 months left on your contract, you should have already be ready to jump to another ship.
3. Avoid the delay game.
One of the incumbent carrier's favorite tactics is to try and run out the clock.

  If you have less than 6 months left in your term,  your incumbent carrier will do everything it can to delay. They do it with a skill only equaled by Ahmadinejad delaying his nuclear program.  They will stall, take several weeks to meet with all the Sr. Executives and remind them what a strategic partner they have been and all the special things they do. Then they can take 3-4 weeks to get you your new proposal. When you see how bad it is, they will take another 3-4 weeks "working the numbers" and more meetings etc...  Then they will bring in an executive negotiator which will need another 30 days to get special pricing. Standard lines include:
1. "To get this special pricing, we just need another few weeks". "your are really going to like what we are putting together".
2. "We have some preliminary numbers you are going to love, but they still haven't been approved by finance".
3. "We are going to need to get our executives involved get your special pricing approved".
4. We can't tell you yet what the pricing is until we get executive level sign off".
5. "Our finance team needs to see more information on the competitive bids.
   
   If you have negotiated contracts with one of the big two carriers, I am sure you have heard every one of these excuses. It is part of their standard playbook. Now, you are down to 3-4 months left on your agreement and it is probably too late to get new agreements from another carrier and implement your new network before the end of the term is up. At this time you get their best and final.  When you realize that other companies are getting better pricing and terms, it is too late to do anything about it. When you reach the end of your term you have to either, terminate or sign up for another term. Your carrier knows this.  If your not prepared ahead of time, you just lost your biggest bargaining chip and its another stay at the Hotel, whether you like it or not.
1. Have credible competitive data
   Every carrier sales team out there knows that without a credible threat, their management will never sign off on special pricing. The carrier will need to see something that proves you got a better deal or they will not likely go for it. Think about it, if one of your sales reps came to you and said "we need to reduce this customer margins by 40%".  With nothing more than the word of the customer, would you give it to them?   If you can find a company with a real time market pricing database or a library of contracts from that same vendor showing better terms to another customer, even better. Your sales team does not want to lose commissions. Make it easy for them to sell to their management why you should get special pricing.
2. Send them an official notice of termination
   Do not be afraid to send them an letter of intent 6-8 months before the end of term indicating that you will not be renewing their contract and will start moving business once your revenue commitments have been satisfied or the end of the term, whichever is sooner. Once you have put this in writing, I can assure that nothing gets your carrier's attention faster. You can always cancel your letter of intent before the end of term if need be. Remember though, you want to be in a position to really leave them if they do not provide a fair price.

If done right, you will have every leverage point on your incumbent carrier and you can call the shots.

How to stay out of Hotel California in the first place?

There are several things you can do to avoid getting another 3 year stay at the hotel, with rates higher than your competitors. In order to get your carrier to agree to these things, you must have the leverage to demand them.

1. Your commitment level. 
   Demand a term commitment vs. an annual one. If you know your spend is $10M/year or $30M over 3 years, sign up for a commitment of only 60% of your total spend or $18M. At your spend rate, you will have satisfied your revenue commitment in less than 2 years. This means you can check out anytime you want AND can actually leave. Your carrier however will still obligated to provide you the services at the current prices until the end of the agreement. This is crucial. You carrier will fight you on this tooth and nail on this point. They will say that they cannot give you the discounts you want with such a small commitment. There are many carriers out there who do not rely on these big commitments. If you can show your incumbent carrier that your competitive bids require substantially smaller commitments, the leverage swings back to you.
2. Extension periods.
   Do not sign up for more than 1 year extension periods.  A 2+1+1+1 term gives greater flexibility. Do not sign up for a 3 year term with a 3 year renewal.
3. Auto renew
   Pay close attention to these.  Know when your cut off is to terminate the contract or have it auto-renew.  A better end of contract strategy is to get the contract to convert to a month to month agreement, but with all the discounts and terms provided by the previous term.
4. Attainment Contracts.Another strategy is to negotiate a pricing structure based on how much you actually spend vs. what you commit to. By signing a small commitment and leave the rest to actual spend, this gives you flexibility to leave with less downside.
5. Annual Rate Review
   Next time you negotiate a contract, get an annual rate review.   (Sample language from some of the contracts we negotiate).

Review of Rates and Charges
"At Customer's option and upon its written request, the parties shall meet at least ninety days before the first and each subsequent anniversary (except the last, and not counting any un-exercised renewal periods) of the Effective Date. Acting in good faith, the parties will seek to determine whether (and, ifs, what) changes to the Rates and Charges and/or Customer commitments are appropriate in the light of then-current service alternatives and pricing available from (Carrier ) and its principal competitors in the marketplace for communications services. (Make sure you define as broadly as possible to avoid someone like ATT saying Verizon is their only competitor). Taking into consideration the total volume of (Carrier) revenue generated by Customer globally across all current and new (Carrier), the intent of the parties is that the Rates and Charges in the Attachments for the Services, taken as a whole, remain competitive with the rates and charges available in the marketplace for Services comparable to the Services that will be provided to Customer. (Again, be sure to define broadly) Subject to be obligations to other customers (Carrier) agrees to provide customer pricing and other information relevant to this determination. (Be sure to define what constitutes these obligations. You do not want the Carrier to say that they cannot share any other internal pricing data, because each customer is under NDA)."

Unfortunately, we see so many of our large client's contracts convert to month to month pricing when the time runs out or renew for  another 3 year term.  This means all those 90% discounts stop. For each $1M/month in spend, your rates will go up by approximately $9M each month. Now the leverage shifts squarely in seat of the vendor. If you haven't followed the tips above, the vendor will know that there is not enough time for you to move vendors and thus there is no risk of you leaving.  The carrier will call your bluff and its back to being a guest at the hotel for at another 3 years.  You end up being essentially coerced into signing whatever they offer you, "or else". This cycle continues over and over again. By the end of your second 3rd year term, you company could be paying more than 60% over your smaller competitors. See table.  Based on the Carrier's "Hotel California" contract strategy, they do NOT like giving out exits.  The ONLY way you are going to get these types of clauses in your agreements, is if you have sufficient, leverage and/or can show them where other client's have received the same. 

No matter how big your company or how proficient your procurement team is, your carrier will not freely offer you the best terms unless you know already know what they are. Your carrier will not share with you what other customers are paying.  The only way you will know what these measures and clauses are in the first place, is to have a library and database of your incumbent carrier's other customer's contracts as well those of other carriers.  Your carrier will deny all knowledge of such terms.  When you can show proof to the carrier that they have given these same terms to their other customers, checkmate.  

These are just a few ways to enjoy the Hotel California, checkout AND leave any time you want.

This is a big part of the carrier's negotiating playbook.  For a period of 10 years, I was one of the top producing Account Executives for 3 different telecom carriers and co-founded a publicly traded telecom carrier.  I used these tactics every day to great effect.  Now that I am working on the other side of the table as lead contract negotiator for Global 50 companies, telecom companies, Big 3 consulting firms, and Fortune 100 to 5000 firms, it almost seems unfair.  With a track record of saving clients over $280M, we know these strategies and tactics work. 

 These tactics are not just for telecom, the are just as applicable to software licenses, mobile agreements and many other contracts.  The larger you are, the more difficult it is to change vendors. As soon as the vendor feels your can't realistically go anywhere, your right back at the hotel. 

Anyway, I hope that you find this article useful the next time you are sitting across the negotiating table from your telecom, mobile, IT or software vendors.  If done right, you WILL significantly improve your contracts and lower your operating costs. 

Tips from an industry insider: Telecom and IT Contract Negotiation: The Aftermath

An existing contract is about to expire.  The RFP has been prepared and sent out.  Responses have been received and reviewed.  The contract has been negotiated and signed.  Savings and improved terms and conditions have been realized.  The team has done an excellent job negotiating this contract.  It’s filed away with a reminder to review a few months prior to expiration.  Now it’s time to negotiate another contract.

All too often, this is the typical cycle of contract negotiations.  Work is done furiously for 4-6 months and then the new contract is signed and put away.  What really happens during the term of the contract; after the signing and before the renewal process?  Here is a case study of what can happen if contracts are not continually monitored.

In this example, the company negotiated a best in class mobile contract.  The term was three years.  As per usual, the contract was filed away after signature.  The company expected to significantly reduce their mobile costs based upon estimated savings calculated at the time the RFP was analyzed.

In the above example, the mobile contract was not monitored monthly by the company.  The graph clearly shows that the cost per device increased from $57 at the beginning of the contract and quickly escalated to $76 per device in just six months.  Monthly costs increased from $29,000 to over $38,000.  The cumulative cost increase was in excess of $200,000.  Again, all this occurred in just six months.

A further illustration of the cost increase can be found on the next graph.  This shows that while the number of mobile devices was decreasing, the cost of mobile service was increasing.

At the end of six months, the number of mobile devices decreased by 249 while the cost increased by $34,821.  These numbers do not meet the expected savings negotiated in the mobile contract.  Budgets and departmental costs will have to be adjusted.

How could this situation have been avoided?  Monthly analysis is the key.  Each month, all invoices should be analyzed and compared to the contract.  Rates, late fees, rounding, minimums, etc. should be reviewed for each line item.  Service levels should also be measured and evaluated against the provisions in the contract.  Without monthly attention, costs can skyrocket and your company will never realize the savings anticipated at the signing of the contract.

If a company utilizes an internal procurement department, it is imperative that procurement either a) audits the line items of each invoice themselves or b) works closely with another internal department on the auditing.

If a company chooses to use a consultant, it must make certain that the consultant is capable of managing the contract process from cradle to grave.  This consultant must, not only negotiate the contract, but perform monthly analysis to ensure proper rates and terms and conditions are being applied.   Caution should be used when paying consultant invoices.  Be wary of consultants who base their fee on “estimated” savings.  Consultant’s fees should be paid on actual realized savings.

By following these rules, a company can make a real, not estimated, improvement to its bottom line, increase profitability and rate of return to its investors.