A mid-sized, not-for-profit licensee of a major health insurance association sought to renegotiate contracted voice and data services with a global telecom provider. Over time the commercial terms began to diverge from the Client’s business priorities, and disparity had crept into the pricing of these services. The result was that the Client was paying too much for a service that didn’t match their priorities in the first place. In addition, a significant portion of the agreement was managed at the association level, which further complicated matters.
Objective
Assist with ongoing telecom contract negotiations and avoid supplier service switches while achieving lower cost, improved terms, comprehensive scope, and favorable positioning for the next negotiation.
Approach
This opportunity was unique because, due to the scale and impact of these services on the Client’s business, and the burden associated with switching providers, the Client prioritized maintaining their current provider. It required a strategic approach to understand and streamline the various contract addenda without negatively impacting the telecom services the Client had come to depend on. The team first created a services inventory and categorized and organized all service (and associated contract addenda) into primary service groups (local, long distance, and data). Alternative quotes were obtained and leverage was applied to compel the current provider to address pricing and improve the service offering.
Results
All identified priorities were protected, including estimated savings of $5 million over three years from the incumbent supplier. These savings were already being realized within a few weeks of final negotiations, and within a year actual savings totaled $3.5 million. The team also streamlined the future contracting process by eliminating any revenue commitment, shortening term lengths to reduce early termination fees, grouping certain contract documents into one master contract, and more closely aligning expiry dates…all while continuing to use the overarching association agreement.
