Knowledge is power

By BRETT MACHTIG
Network World, 04/05/99

Before you try to swing a better deal, you've got to know where you stand. There are five ways to measure the competitiveness of a proposed telecom contract. Each method has its limitations, so experts suggest using a combination of tools to cover your bases.

1. Tariff or benchmarking services. These are relatively inexpensive sources of data, but the downside is that tariff information is hard, if not impossible, to interpret. Tariffs are provided in aggregate, making it difficult to perform a side-by-side comparison. There is also a filing lag of up to six months with some carriers, so these services provide only historical prices at best.

The contracts you want are the ones carriers don't want you to know about, so sometimes they hide the most attractive contracts by filing multiple tariffs to represent the entire deal. This practice is called tariff stacking. Because carriers file tariffs by number and not by customer name, it's difficult to find these hidden gems.

2. Requests for proposal (RFP). An RFP should motivate all potential bidders to submit their best prices and terms, but there are many reasons why this does not usually happen:

Carriers bid to protect their own interests.
Some network managers and corporate in-house legal departments ask for onerous terms and conditions that raise the carrier's perception of risk and thus raise bottom-line costs.
An RFP is just the first step in negotiations.
The incumbent carrier's account team must believe it has a realistic chance of loss or hope for gain when entering repricing negotiations. Otherwise, the team will not provide a competitive bid. Alternative carriers must also believe they have a chance to win your business.

3. Carrier-provided price comparisons. Carriers specifically create these customer lists to justify their higher rates.

4. Third parties. Outside telecom negotiators, legal firms, accounting firms and consulting companies all may specialize in telecom repricing. These firms vary from one-person consulting companies to larger firms that can handle the entire RFP process. The benefit of the more sophisticated firms is they have experience with a broader range of deals. Some firms provide performance guarantees and others charge on a fixed fee or hourly basis.

However, each consultant has expertise in a specific field, so you may need to hire more than one.

5. Internal telecom departments. Most large firms have telecom or procurement departments that handle negotiations and repricing. However, using in-house departments has three drawbacks:

Because employees were involved in negotiating the existing deals, it's hard for them to set aside their loyalty and pride of ownership to get a proper perspective on new deals.
Their experiences might be confined to the negotiations they had with a single regional account team, limiting their frames of reference.
Employees are charged with doing everything they can to improve the bottom line, so when the incumbent carrier offers a better rate, it's hard to decline it. However, the firm may still be paying considerably more than current market prices.

Next: Milestone markers

Knowledge is power

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