How to Avoid Pitfalls when Negotiating Mobility Contracts Globally

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BEFORE THE RFP

There is obviously a lot preparation that goes into this process, does this open the room for error?

Yes. Unfortunately, data gathering phase is often rushed. If going into RFP with only the current number of lines and current spend average, you will not be in the driving seat:

  • Discuss with the businesses. What are they seeing? New upcoming needs? IoT, eSIM? Up trends but also downward trends (> Zero use cancellations or volume commitments)
  • Collect historical data (3 months min, 6-12m preferable) > format > analyze.  This can be challenging, cumbersome, depending on ease of access (current vendor web portal, formats, volumes of data, absence of TEM tool to assist. Contact CBI to assist you with this exercise)
  • Clearly specify the format of the responses expected from the carriers to allow for time gain in response analysis and ease of comparison. (May not be accepted by vendors if volume of lines is small) (More on this during plan negotiation chapter)

CONTRACT TERM

DURATION

What contract length do you recommend? Norm is 24 months, but you can be brought to use shorter or longer terms.

12 months: Why? In which circumstances?

  • If you’re trying to only expand an existing agreement and do not have the bandwidth to run a full-blown RFP
  • Because you have other projects in the boxes (trying to “align” end dates of multiple countries, planning to move to an Alliance type agreement.
  • Downside is obviously that it minimizes your discount negotiation opportunities

24 months: most frequent

  • Good average considering time it takes to RFP/manage contracting process, time it takes to migrate between carriers and PM the transition)
  • Incentive to the carrier to make an effort on pricing discount levels.

36 months:

  • Should be avoided in most circumstances because there has been fluctuation in rates or what packages contain for the same rate for the past 2 decades. Hard to predict when these changes will slow.
  • Does not leave enough room to adjust to internal business changes.
  • You also want to keep your provider on their toes in terms of service quality
CO-TERMINUS CLAUSE

Why is it important to push for a co-terminus clause?

Such clause will give you more flexibility and more options at the end of the contract.

  • IF migrating to new carrier: All existing subscriptions get a new 24 months term (if migrating to a new carrier) corresponding to the end of the contract term. This should not be depending on when they have been migrated (to create a migration project management incentive).

New Subscriptions ordered during the contract term should all “end” at end of the agreement term

  • Stay with incumbent: Why even have a term for lines if you are remaining with the incumbent? Argumentation > These have already gone through an initial term, why should the counter be reset to zero?

In scenario where you buy subsidized handsets, this won’t work because carriers have a specific ROI based on specific term.

LINE CANCELLATIONS 

How to build Line Cancellation in the contract to protect your enterprise:

  • Some contracts restrict line cancellations too much by either limiting the actual number based on a specific number or % of contract baseline, or by imposing a prohibitive cancellation charge such as: # of remaining months X monthly fee at the non-discounted rate. (Hence the importance of negotiating your subscription terms)
  • Business changes > dismissals, divestiture, off shoring of a department etc. There are plenty of situation which require flexibility in that space.
  • If unable to get carrier to flex on this then ensure you have the possibility to move the subscription to the cheapest plan option available (voice only or data only ‘s lowest package) to minimize the impact of having to keep unused lines. Again, might be difficult if subsidized phones.
HARDWARE PURCHASE
  • Most carriers offer the possibility to buy the devices directly from them. Either as an upfront full payment or as monthly installment or subsidy. This aspect needs to be thought through.
    • With a subsidized approach, you are stuck with a min plan size, duration etc and very likely ETFs (Early Termination Fees). Why get stuck if you are anyway going to have to pay the ETFs and end up with the device. You might as well buy it upfront and get the flexibility?
    • Though not always available, try to negotiate a Tech fund instead.
  • Other option: Buying hardware from an external vendor with better prices?

Think twice about that:

  1. Select the vendor, vet it, add it to your approved supplier list (extra work extra cost)
  2. Added complexity in the ordering flow with 2 vendors, 2 orders to track (extra work extra cost)
  3. Added work in finance: Several vendor invoices etc.

Considering the small price differences between a carrier and an external vendor, at the end, ask yourself the question, have you really saved money?

External hardware vendors will likely have a more extended catalogs than wireless carriers which may allow you to better match the needs of your business (allocated cost for devices, specific phone features).

PLAN NEGOTIATION

How do you negotiate the plans?

In the last few years, the pooling of lines has made it to Europe whereas 10 years ago it was mostly prominent in the US and a few other countries.

There are certain aspects you must pay attention to with a pooling model.

Buffer management – what’s the right buffer size? Too large and it can cost you quite some money, too small and it might cost you as well in overages. Basically, that’s where good RFP preparation upfront is important. Base your decisions on factual data.

Correct initial sizing is important as it will avoid you moving from a seemingly good deal to a bad budget surprise down the road. With the revision clause of the pooling terms/size, costs per line can suddenly go up and ruin your initial budget forecast.

Whether you opt for a pooling scheme or for individual specific plans, one thing is key > Make sure you take the time to collect and thoroughly analyze your needs over a period of minimum last 3 months and ideally 6-12 months to be able to detect conjuncture variations.

If going for, or in absence of pooling offers, specific individuals plans, do not settle for 3 data only plans and only 1 voice & data plan if the non-data only plans are tied (voice/data). Based on your usage analysis of the past few months, set the main plan to the Gb threshold just above.

Ask to keep a simple voice only (eventually local calls only) at a bottom rate in case you have not been able to get a flexible deal on the line cancellations.

Do not however fall in the opposite pitfall where rate tables are so broken up that people who were not part of the negotiation cannot make sense of it…

Another aspect to look for when prepping for your RFP are the frequently visited business countries. This will allow you to ensure that you negotiate the best tariffs for the zones that matters to you. What’s the point of having great rates for a travel zone unused by your users and not so good rates for the most frequently visited one? Of course, the changes in roaming policies in the EU specifically have made this simpler for those established there.

DISPUTE MANAGEMENT CLAUSE

What other smaller contract clauses could benefit from attention during negotiations?

The dispute management clause would be a good example.

In some contracts, carrier will impose a clause such as “Any dispute must be raised within 30 days of invoice etc.”

Be careful with accepting such clauses. Between the moment the invoice is issued, the invoice copy is received, lands in the right hands and then in whoever audits it might be already too late…

Issues are not necessarily easy to spot, people usually handling internally may be unavailable for a period. Whatever the reason, you should ask for a very minimum of 3 months from invoice receipt to raise claims.

 

IMPLEMENTATION OF NEW CONTRACTS

Rate Plan Implementation

  • If migrating to a new carrier then obviously the new rates will be in application as of when lines are ported. Factor lines migration times into your business case as you may not assume contract signature = savings start date unless negotiated as such.

Some factors may adversely affect the timing.

  • You are renewing with your incumbent carrier? Job done- New rates = contract signature + a few days/weeks > Wrong assumption. Sometimes, getting new rates implemented with your incumbent takes as long as migrating to a new carrier!
    • Carrier may be taking opportunity of the new contract to migrate you at last to their new billing platform…
    • New rates are only effective once implemented so for carrier the longest he keeps you on old rates the longer they keep their old margins…
    • Resource availability
    • Staying with carrier but moving to a different business  engagement model (“1 carrier for several countries…”, for instance GEP within Vodafone)

Consequently, ask for new rate implementations commitments in terms of timing. Not possible to commit on timing? Then commit on retroactive date for a credit in the event new rate implementation tales more than a month.

Whatever the scenario, audit your new rates within 3 months of implementation, and maybe even more so when staying with incumbent. Are all the requested features properly implemented, for the right users? This sort of activity can be time consuming if you don’t have a TEM partner, but this step will often help you catch some errors and potential credits.

PORTING

It seems that often, people go into negotiation with the main objective of renewing with the incumbent at better rates. Would you agree?

Yes. BUT Don’t let the prospect of having to port all your lines to a new vendor restrict your decisions. Number porting exists now for several years and carriers have developed inter carrier processes. The receiving carrier will do most of the leg work. Moreover, soon , the rise of the eSIM will make transition between carriers easier and faster than ever, removing the need for physical SIM swaps.

Until then, there are still a few practical aspects to consider for such changes. Practically, in EMEA, avoid projects in summer month. Most carrier still require SIM activation to take place in-country and with people on holidays not necessarily in their home country this may cause issues.

Holidays both in your workforce but expect lower workforce as well on carriers’ side…

Of course, porting always carries some level of efforts which needs to be accounted for. So, don’t be afraid but don’t migrate either for a mere 1% saving (depending on how much that represents).

Before making the final call, ask to test coverage in your main locations. Even though coverage has improved for all carriers globally, do not assume that because signal gets through fine in your building that it will work equally fine with another T1 carrier.

 

AFTER THE RFP

You think you’ve done a great job and saved your company thousands of dollars with this new contract? You might have indeed but signing the RFP is not the end of the job. Internal communication afterwards is key to ensure that all your efforts do not go wasted because of the way life-cycle is managed, or not managed, afterwards. As the lead negotiator you have responsibility in that. Too often, a signed contract is considered as job done.

Communicate with the individual/team/partner in charge of managing your mobility life-cycle. Summarize the key contractual clauses (those affecting cost at least) as well as explain the plan structure.

Day to day, I am dealing with individuals who often do not have a copy of the contract under which they are supposed to operate. This then makes it difficult for them to get the most out of the contract in terms of plan optimization, plan selection, etc.

If you didn’t get a chance to attend our most recent webinar, you can listen to our webinar recording here.

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