It is often observed that once a contract is agreed upon, you can put it away and hope you never have to use it. This is not the case with contracts for communications technology services. Now more than ever, as technology is on the move, keeping your contracts with communications service providers current and relevant is more important than ever. The cost of not keeping up with this can be significant. While some types of communications service prices are coming down, many are increasing dramatically and with little notice (e.g. a $900 a month dial tone line that cost $40. last month!)
A good start to minding the particulars with all your communication service provider contracts is to collect a copy of each contract you now have in place and put them all, row by row onto an Excel spreadsheet with the following column headings:
Different service providers have different approaches to contracts, so once you have collected your contracts and entered the information onto the spreadsheet, it is advisable to speak to each service provider representative to be sure you are clear on their contracting process and that their records agree with yours on the contracts currently in place.
A good next step is to collect each account number on the monthly bills you receive from each service provider and determine whether the rates on these bills are covered by the contracts in effect. If a service is not covered by a contract, it is likely you are paying a lot more than you need to.
When a new service is ordered, make sure that it is covered by an existing or new contract and keep track of all account numbers associated with each contract, updating your contract tracking spreadsheet described above.
Many contracts include an Annual Volume Commitment (AVC) also known as a MARC (Minimum Annual Revenue Commitment). This commits you to spending a certain agreed upon amount for each year of the agreement. If your contract includes an AVC it is important to know which of your services contribute to it and to check it at least quarterly to be sure you are on track to meet the commitment as there can be a penalty equal to the shortfall if you do not. Again, be sure your service providers records match with your contracts.
In most cases, it does not make sense to sign a contract for longer than two years as you may be locking your organization into higher rates. Most service providers will agree to an “early renegotiation” so do not hesitate to ask if that is possible if it may result in a lower monthly cost for the same services.
It is likely that you have separate contracts for different types of services bought from the same service provider. For example:
If possible, ask for all of your contracts to expire on the same date which will likely simplify the contract renegotiation process if you are keeping these services. The more you spend with the same service provider, the greater the likelihood that they will spend time with you and support your contract management efforts.
Another aspect of contract management is to minimize are any early termination penalties in the event of discontinuing some of your contracted services before the end of the contract. Even if you are on track to meet your annual volume commitment for spending, you may still incur a penalty for removing a specific service. Before disconnecting a service, check on what this liability will amount to. In some cases, if you buy another service of a similar amount then the early termination penalty may be waived. In the case of mobile services, you may be able to negotiate early termination penalty waivers as part of your agreement.
A final suggestion: Many service providers have a master service agreement (MSA) describing terms and conditions that apply to all other contracts written with the service provider. Many times an MSA can be in place for 10 years or more and much of the language is no longer applicable. If you have an MSA make sure that it is periodically updated to reflect current services and practices.
Jane is writing on behalf of the SCTC, a premier professional organization for independent consultants. Our consultant members are leaders in the industry, able to provide best of breed professional services in a wide array of technologies. Every consultant member commits annually to a strict Code of Ethics, ensuring they work for the client benefit only and do not receive financial compensation from vendors and service providers.
