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What Comprises a World Class Contract?

The appeal and instant gratification of saving money can lead enterprises down a dangerous and costly road in managing their telecommunications supply chain. While the price points and the immediate savings offered get most of the attention in the procurement process, other equally important factors can easily be ignored to the peril of the enterprise. While savings are nice, even critical they cannot be achieved at the expense of bad contract provisions. In a changing market, the sweet taste of immediate savings will fade away and one day the terms of the contract will bite back with a vengeance.

You may find the market prices have shifted significantly but your enterprise has no leverage nor do you have a robust price review clause to secure a new round of improvements. An enterprise may finally be ready to make a technology change, perhaps to VOIP, or WiMax or it may benefit them to implement a new individual liable mobility (BYOD) program and downsize the enterprise responsibility; yet they discover there is no flexibility and they are at the mercy of the incumbent suppliers. A carrier may be falling down on the job, with horrible support, service and network performance; yet there are no defined SLAs and the weak “Swiss Cheese” standard tariff provisions they thought protected them provide no recourse. The sale of a subsidiary or a shutdown of operations, in response to the economy, may have an extra sting if commitments and mitigation clauses are not precisely spelled out in the contracts. There is an almost unlimited list of potential gotchas that could spell trouble down the road.

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Negotiating from a position of weakness is never a good idea. To avoid falling into the perils, described above, the time to proactively address substantive contract provisions that provide ongoing flexibility and leverage and which also mitigate risks and penalties for subsequent events is when the contracts are negotiated; definitely not after the fact. As a former carrier executive responsible for addressing these types of enterprise issues, the first thing I would look at is the existing contract to determine what rights and leverage the client had and what legal obligation we the carrier had to address them. If the provisions were nonexistent or simply feel good “chit chat” clauses without any substance, I knew we as the carrier had the upper hand in the negotiations that would follow.

Carriers will tell you not to worry about these things and that they will work with you if they ever become problems. Don’t buy that for a minute. Contracts are between two legal entities, not between two people. People come and go, situations change. You can ill afford to blindly trust a relationship to fix future problems. While a huge asset, good relationships must also be combined with a robust contract that defines the requisite provisions necessary to protect the enterprise.

TelAuthority is the AUTHORITY on delivering world-class results for the enterprise. Working with your internal telecom/procurement teams, we will address all relevant facets in helping you choose your carriers wisely with the confidence that you have excellent pricing and the security of knowing you have protected your company from any undue risk or liability.

World class pricing by itself does not a world-class contract make. Contract jail is no place to be found when action is required. TelAuthority looks forward to discussing your situation and showing you how to achieve a true world-class outcome in your telecommunication sourcing initiatives.

Written By:  Pete Wilson; CEO of TelAuthority, LLC

 

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