Situation: This customer was 1-year into a 3-year contract, with the majority of its telecommunications services provided by a Tier-1 carrier. The existing contract was negotiated by the customer over an 8-month period and was moderately aggressive. Network services included voice, data and access for a complex domestic and global infrastructure. Aggregate expenditures for all services were $15 million per year.
Negotiation: G2 was engaged to assist in the negotiation of an “Annual Rate Review” that was contained within the existing contract. The customer’s internal negotiations targeted a maximum 10% reduction in costs that they could achieve alone, and they were expecting the remaining 2-years of the contract to remain in effect.
This negotiation’s success stemmed from G2’s expertise and the discovery of key leverage that was applied against the incumbent carrier, establishing a highly competitive negotiation environment. Neither the customer nor the carrier had evaluated the fact that the amount of expenditures under the contract permitted the customer to effectively terminate the contract at their discretion in as little as 4 months. The discovery of this fact was powerful in forcing the incumbent carrier to negotiate aggressively in an effect to “win back” the customer. If the incumbent failed to negotiate aggressively, G2 was prepared to launch a full-scale multiple carrier RFP.
Result: Successful results were a 26% reduction in overall costs and an entirely new, more flexible contract. The negotiation was completed in less than 8 weeks. G2 constructed the revised contract with a 20-month term based on the customer’s usage expenditures – a term that was shorter than the remaining term of the original contract. G2 also improved significant terms and conditions of the deal, focusing on an improved Annual Rate Review clause that would hold the incumbent carrier to very strong requirements regarding subsequent rate improvements.
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