Wireless Contract Negotiation – Understanding the Priorities of Wireless Contract Negotiation

Many organizations fall into the same trap when negotiating wireless contracts – listening to the wireless carriers. All wireless carriers know where the savings opportunities are, and most importantly they know what you’re spending. Negotiating the buckets of spending that your carriers offer will only end you with an ineffective contract.

There are a few guidelines you should follow when negotiating with your wireless carriers.

Know your spend. The most critical rule is knowing your spend. You wouldn’t go into a gunfight without ammo would you? You must understand how much you spend on voice and data plans, feature charges, minutes used, equipment purchases and replacements, etc. You will not get an acceptable contract without knowing your spend and where to focus.

Ignore volume percentage discounts. I’ve seen many companies focus on volume discounts, but it’s the absolutely wrong approach. I guess it’s a bragging right to tell all your procurement buddies, “I negotiated 25% from Carrier X.” I’d much rather take the initial 20% offered and focus on rate plan, features, equipment costs. The extra 5% would only equate to $50K annually for every million you spend.

Focus on service charges. Like the guideline above, focus on the service charges. After all, it makes up most of your wireless spend. Negotiating $10 off your rate plan costs would equate to an annual savings of $120k for every thousand users you have. Much more savings than focusing on the percentage discount.

Negotiate out of service level contract terms. The carriers will push for service level contract terms of one or two years. Negotiate out of this if at all possible. A service level contract term will complicate your wireless management, or you’ll be hit with early termination fees. If a line is under a two year service contract and that user leaves the company, cancelling the service early could result in a $200 termination fee. It’s much wiser to give back some of volume discount percentage to eliminate the early termination fee issue. If you can’t negotiate out of this clause, you’ll need to ensure you manage wireless numbers and reassign rather than cancel.

Fight for fixed equipment pricing. Like service line contracts, you don’t want to manage upgrade pricing. Many carriers will subsidize the first piece of equipment heavily but force you to pay extremely high costs if replacing within a year or two. Paying $500 for a Blackberry three times because you have an executive who keep dropping them off his yacht is not fun. Try to negotiate flat pricing for equipment. Don’t focus on specific models, as they always change, but on classes. Put the responsibility on your carrier to offer devices in the same class or higher at the negotiated rate.

Look for other benefits. Does your organization have other needs? Are you looking at Wi-Fi for your locations, bar code scanners at your warehouse, Fixed Mobile Convergence? Work with your carriers to provide these services as part of your contract. It’s extremely difficult to get capital approval in today’s environment. Let your carriers fund your projects. Wireless carriers are happy to provide these added services as it carries over into more usage and more users. As long as it’s related to wireless, your carriers can help.

Speed is a strategy. How long have you seen wireless contract negotiations take? Six, eight, ten months or longer? What value comes out of these long negotiations? I’ve seen organizations in a year long contract cycle and only achieve 10% greater savings than the offers exchanged in the first 2 months of the contract.

To clarify my point, let’s assume the initial contracts offered the potential for $500k in annual savings. The additional savings over a three year contract (at 10%) would equate to $150k.

  • Initial Contracts Savings Potential Annually = $500,000
  • Monthly Savings Potential – rounded = $ 42,000
  • 10 Month’s of Savings Lost = $ 420,000

In this scenario, the organization lost $420k in savings to achieve an additional $150k. Now, you could argue that the organization will still get the $420k, it’s just pushed out farther. This is true, but when you factor in the amount of time and man-hours invested into the longer contract cycle the $150k in extra savings erodes pretty quickly. In any event, I’d rather start getting $42k in savings now and move on to the next opportunity.

The specific approach to a wireless contract negotiation varies based on your organization’s specific needs, but these guidelines will help you focus on the true savings opportunities.