New enterprise locations may wind up never be opened; some locations are closed while others are downsized. Enterprises migrate from wired to wireless services. Can the enterprise shed these services; reduce WAN expenses without penalties or risk?The issues may be contractual. The issues may be related to the internal organization. The issues may change the Service Level Agreements. Service provider contracts may appear to be nearly identical to one another, but this is not true. Many service providers are pressured by their customers for specific inclusions or exclusions that are not offered to other enterprises. So the enterprise has to assume that there is no cookie cutter approach to shedding extra WAN services.
The contractual issues can be summarized as follows:
* The contract may call for minimum revenue for the service provider. If the revenue goes below a certain point, then the rates for the remaining services will probably increase. It may be cheaper to keep the excess services and not use them rather then cancelling them.
* A service provider may not allow the resale of the WAN services.
* The Service Level Agreement may not be transferable to a third party making the resold services less attractive to third parties.
* Termination fees may apply for early reduction of the procured services. Look at the termination fees. It may be cheaper to ride out the contract than terminate the services.
* Look for an exchange arrangement in your contract. You may be able to replace private lines or frame relay with MPLS services with no penalty assuming the revenue commitment is satisfied.
* Does the contract have a renegotiation clause that can be used to change the contracts services?
The second set of issues deals with case of resold services--specifically, the scenario in which the internal organization of the primary enterprise manages the services for the third party that acquired the excess services from the original buyer. The original buyer's network staff may be accepting responsibilities it can not satisfy. Will network staff or internal contracting staff have to be added to manage the resold services? If so, the extra staff cost will negate some of the anticipated savings.
Here are some internal organization questions that must be answered before embarking on the service resale.
* Can the enterprise actually go out and sell these services? Are there marketing and sales people available? If an outside organization is given the task to resell the services, then that organization would expect some commission for the resale effort, thereby reducing the savings.
* The internal network staff has to determine what and how much service is to be resold. The network staff has to gain support from enterprise management for this resale effort. What if the enterprise reverses the planned WAN service reduction? How does the network staff plan for this possibility?
* The enterprise must now write a contract for the resold services. Who does this? What are the legal ramifications? Will external legal counsel be required?
* If the resold services are offered with a SLA, how does the reselling enterprise monitor the SLA? Will extra equipment and staff time be required? What if the SLA is not met? What are the penalties?
* How does the network staff handle the billing? What about bill reconciliation? How are the payments tracked? Will late payment penalties have to be paid by the primary enterprise when the third party payment is late or not paid?
* Is the enterprise network staff ready to become a service provider? Will the mission statement need to be rewritten? Will the staff be happy with the changes?
* If the WAN services are resold, will there be a profit? Under what conditions could a loss occur? What if the entire resale effort is a break even? Would it be worth the risks for a breakeven solution?
Reselling excess WAN services may be a good idea. It is worth exploring. This does mean however, that all enterprises will be successful. Consider these three recommendations before committing to the resale effort:
* The enterprise staff must understand the terms and conditions of the existing contracts. DO NOT assume that you will understand all of the contractual elements. Discuss the contracts with lawyers as well as the network staff.
* If the resale effort is to be pursued, thoroughly evaluate the ability of the enterprise staff, technical, administrative and legal, to ensure they are up to the effort.
* Weigh the benefits and risks. If the profit is small or the risks high, do not continue with the resale effort. Be more pessimistic rather than optimistic in your estimate of the cost reduction.
