By Tanya Seda
We recently worked on a telecom expense cost reduction project for a new client that was having significant problems with one of its major carriers. These difficulties centered on billing and implementation issues that had been going on for over 2 years without successful resolution. We were brought in to assist, and as we dug in here’s what we found:
The original contract was poorly written and even more poorly negotiated with an inexperienced wholesaler who didn’t really understand the details and nuances of telecom carrier pricing and agreements. Two examples: first, the agreement included a Minimum Annual Revenue Commitment (MARC) that was almost 100% of the then current spending!
Second, the rates were significantly above market rates. While it looked, on the surface at least, like they would be saving money because the new rates were lower than their previous rates, the rates were still 30+% over market rates.
But the problem didn’t stop (or more accurately, start) there. In actuality, the trouble started around 7 years ago when the implementation of the initial contract required a migration of services from multiple carriers. As this was being executed many terms and conditions were overlooked, and others were missing. To name just two, there was no ramp up provision nor were there were any implementation SLAs. As a result, the client started out on a bad path and received little support or problem resolution.
As a result of this “trifecta” of bad circumstances, the customer was in a bind, to say the least. From our forensic analysis of their portfolio, we learned that the spending commitment left no wiggle room to shift services, and the implementation took too long. This, in turn put them in “underutilization default” within the first 6 months of the agreement! Adding insult to injury, the carrier avoided the “over-committed” penalty. To try and sort out the problem they decided to reduce the underutilization penalty and add twelve months to their contract. Unfortunately, this just served, so to speak, to toss gasoline on the fire, as it compounded the problems rather than to resolve them.
According to our analysis, it appeared that the migration issues caused interruptions in service and resulted in almost all of the services being put on either the wrong contract rates or billing platform. The client spent a great deal of time and resources to try and straighten out the billing issues but could not ever get to the bottom of the problem.
After a new CIO came onboard, the only thing that changed was the account team, and he had to somehow try and understand all that had happened in prior years. Luckily, we went down the rabbit hole on his behalf, digging into the billing and the contract in great detail while also establishing communications with the account team. Unsurprisingly, we found the “good and the ugly” of the deal.
The ugly news was that they had hit the “trifecta” (horrible contract, terrible implementation and inexperienced account team) of carrier service elements. In our experience, if any one of these items is a problem they can usually be overcome by the other two; that is, a horrible contract can be overcome by an experienced account team that works to ensure a good implementation. When none of the three are working, then you have a recipe for disaster.
So how did we get them from ugly to lovely?
Our account team set up weekly calls with the carrier account rep to open claims, track issues, progress reports all the way through to billing resolution. In addition, our contract management team were able to escalate the issues to the carrier and resolve them in a timely fashion. In fact, our detailed audit found over $86,000 in both one-time and monthly recurring billing errors that we corrected due to services being disconnected but still being billed.
Additionally, we migrated all of the accounts from retail to wholesale accounts and got them moved to the proper billing platform, saving money and time.
We then positioned the customer to conduct a sourcing RFx for their services to be released in the near future. With our sourcing and negotiation expertise, we were able to obtain market-leading rates terms and conditions. With our services we were able to reduce by 38% their monthly recurring costs and deliver stringent installation SLAs to assure business continuity and on-time installations.
The cautionary tale here is that telecom contracts are complicated and confusing, and it is best to be prepared for contract negotiations by fully understanding your detailed demand set and having in-depth knowledge of the current market, as well as making sure you have resources experienced in the complexities of these agreements.
Lastly, it’s important to keep in mind that these contracts are not “set and forget”. Carrier billing systems are extremely complex and even if billing starts out correctly, new orders, software updates and human error can all contribute to incorrect invoices. It is critical to perform periodic billing audits to ensure accuracy and contract compliance. For that you should always turn to the experts!