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How to save money on carrier services

Carrier services are major contributors to IT costs, but you can significantly lower those costs by negotiating with your WAN service providers. Here we list the top questions that can help save money when preparing an RFP and negotiating with carriers.

The largest single cost component in most enterprise communications budgets is wide-area network (WAN) carrier services. Carrier services can come from national service providers like AT&T and Verizon, international providers such as BT Global Services, or smaller regional or local providers, and they are crucial to modern businesses.

Whatever the source of your WAN services, you'll need a contract to support the relationship, and preparing for negotiating that contract can save you big money. Asking the right questions is crucial to the negotiation process.

Asking the right questions doesn't guarantee you'll save money, however. You need to determine the optimum response to each of the questions and how far you'll push your potential carrier to get that response. The best way to do this without creating bad feelings is to prepare a request for information or request for proposal (RFI/RFP) and ask these questions as a part of that process. That way, the prospective provider(s) knows that you are looking at competitive bids and will be more likely to offer the best deals, with less pushing and pulling on terms. You can expect to get a favorable response to every one of these questions if you have a reasonably large service contract.

Question 1: Can you provide a summary of contract discounts for longer-term agreements? Most carriers offer better pricing for longer-term contracts, and what you want to see is where the greatest gain in discount comes. Make a spreadsheet plotting the discount against the term, and see where the curve is the steepest. That is probably where you should start your negotiation.

Question 2: Will you adjust pricing on existing contracts to reflect new contract prices you offer? Service prices are trending down, and it is very possible that your carrier will lower rates at some point during your contract term, especially if you select a longer-term contract. Be sure to find out what the basis for the reductions would be (which contract price changes will result in your own price changing) and how the change in your prices will be calculated.

Question 3: Will you waive change or cancellation fees if the contract is changed before it expires? (as long as you re-up) Some carriers will charge you change or cancellation fees on contracts, and if you are making changes to accommodate new sites or new traffic needs, they can be costly. Some will waive fees readily for more expensive contracts but resist it on a move to something less costly.

Question 4: Will you waive change or cancellation fees if my company is acquired or acquires another company with its own network needs? In an age where consolidation is increasingly common, you may find mergers and acquisitions creating a problem for your contracts if your carrier won't release you from a contract or allow you to make changes when you buy (or are bought by) another firm.

Question 5: What service attributes will you guarantee in a service-level agreement (SLA)? SLAs can cover service availability, time to restore, scheduled outages, bit rate, packet loss, delay, and delay jitter. The parameters your contract guarantees will be important to determining whether you have any recourse if a service problem affects your applications and your business.

Question 6: What is my compensation in the event that you fail to meet the SLA? Nobody will pay you consequential damages, but you can expect to get a refund on your charges. The question is how long a period will be refunded, and whether there is a minimum outage/failure that you must tolerate before refunds are granted. A realistic goal is to have a system that refunds you for any day in which a failure in SLA of a specified magnitude occurs. Be aware that in many cases you will be obliged to report an SLA problem; find out what the window is for this reporting.

Question 7: How will contract disputes, including SLA disputes, be resolved? Your company may have a policy favoring arbitration, or you may prefer to have an option for a lawsuit. In either case, you need to know exactly how the dispute resolution process will be conducted. In cases where litigation is permitted, you'll want to know whether there are restrictions on where the case can be filed.

Question 8: What monitoring and measurement tools do you offer with the service, and what tools will you accept on my side to report SLA failures? You need to understand how you will be expected to know of an SLA problem and what proof your carrier will accept that one has occurred.

Question 9: If I am forced to move traffic to backup facilities at additional cost to me if there is an SLA problem, will you pick up some or all of this cost? Many enterprises will have multiple providers or some means of providing backup for services, and there may be additional costs associated with using these facilities. If you have a service failure, will your provider refund the cost of alternatives to you? This may open a dialog with your potential providers on what backup options they might provide.

Question 10: Are there any support charges associated with sustaining and troubleshooting the service, and are there shift differentials for these costs? Some carriers may try to charge for support calls if they are not proved to be at fault, or charge different rates for evening and night calls. Obviously, you don't want to pay those if you are a 24-hour operation.

Question 11: Will you show me similar contracts you've signed with other companies in my area (removing the names if necessary) for comparison? You can benefit enormously by getting access to other contracts, particularly those from customers with some experience with the operator. What guarantees are they asking for?

Knowing the key questions to ask and the answers you would like to receive will help you define the services you need and get the most for your money before you sign on the dotted line.

About the author: Tom Nolle is president of CIMI Corporation, a strategic consulting firm specializing in telecommunications and data communications since 1982. He is a member of the IEEE, ACM, Telemanagement Forum, and the IPsphere Forum, and he is the publisher of Netwatcher, a journal in advanced telecommunications strategy issues. Tom is actively involved in LAN, MAN and WAN issues for both enterprises and service providers and also provides technical consultation to equipment vendors on standards, markets and emerging technologies.

This was last published in March 2009

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