Every business is feeling pressure to examine expenses closely as the Covid-19 pandemic tightens budgets worldwide. Telecom and IT costs—especially for office-related services that may be used less or not at all in the near term—are under particular scrutiny.
Reducing network and telecom spending is challenging. Early termination fees can be steep (sometimes the full remaining contract value), contracts are often lengthy, and service providers make contract changes or cancellations procedurally difficult.
If you need to reduce telecom or IT expenditures, follow these steps to identify opportunities and negotiate effectively.
Step 1: Determine what’s eligible for rebidding
Start by consolidating all contracts related to telecom, networking, software, and IT services—internet access, WAN, phone systems, data centers, managed services, SaaS, and cloud. Identify the largest cost items, contract end dates, which agreements are already eligible for renewal, and any clauses that could influence your options.
A well-organized procurement function pays dividends here. If several contracts are up for renewal, you can move quickly to rebid those services and capture savings.
If some services remain in contract, review the agreements carefully. Definitions of service scope, contract term, breach consequences, or force majeure clauses might offer paths to reduce costs or modify service levels. For large or complex contracts, involve legal counsel to evaluate potential avenues.
Never engage with your ISP, MSP, or SaaS provider about changes until you fully understand the contractual position.
Step 2: Rebid whatever’s eligible
If a contract term has expired, you have more leverage. Bandwidth and service pricing generally trend downward over time, and providers are competing aggressively for revenue during Covid.
Investigate Covid-specific promotions from network and software vendors, negotiate every element of your agreement, consider using a telecom agent, and use online tools that compare vendors or solicit competitive quotes for network services.
Use the current market environment to negotiate not just on price but also on contract flexibility and service terms so your organization can remain agile. When providers won’t lower rates, they may offer incentives such as free service months—factor these into your negotiations.
Remember: your greatest leverage is before you sign a contract.
Step 3: Negotiate around existing contracts
If you can’t exit important contracts, you still have options. Prepare a clear request and an offer in return. Possible asks include payment deferrals, temporary rate reductions, or suspending services. In exchange you might offer a longer commitment, a larger overall revenue guarantee, or participation in a case study. Frame the trade-off so it’s logical from the provider’s perspective—ask what they would require to justify the concession.
Strong relationships with account representatives are valuable. The representative you reach can affect outcomes—someone who cares about your account and has influence may secure exceptions that others cannot. When deciding who to contact, prioritize both familiarity and appropriate seniority.
Before calling, prepare a concise script that explains your situation, cites relevant contract provisions, and presents your proposed exchange. Keep the tone professional and cooperative, but be clear about the potential downside for the provider—such as the risk of losing your business. If your company is a long-standing or high-volume customer, make sure they understand that history.
Step 4: Optimize for the future
Through this process you may identify gaps in procurement and contract management—address these to avoid similar difficulties later.
First, negotiate flexibility into new contracts. You have the most bargaining power before signing, so consider paying a modest premium for optionality if it reduces future risk. Pay attention to cancellation and early termination fees, and negotiate rights to shift spend within a provider’s portfolio if that aligns with your needs.
Second, cultivate relationships with your providers. Know your account managers, acknowledge their efforts, and refer them when appropriate—reciprocal goodwill can be useful in tight situations.
Finally, keep informed. Channel partners and industry resources can help you make smarter procurement choices. Track public data on pricing trends, such as bandwidth costs, so you remain an informed buyer.
Photo by Damir Spanic on Unsplash
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