In recent years, many large organisations have appointed one service provider for their whole-of-enterprise data, fixed line and mobile telecommunications. The service provider benefits from the large amount of money spent by the client and can 'up-sell' other products and services. The customer benefits from preferential pricing, volume discounts, key customer status (which often comes with a range of benefits), and a single relationship to manage or blame if anything goes wrong.

To gain the full value of these types of contracts the customer needs to consider the following issues:

1. Transitioning from existing vendors

The customer needs to look at its existing vendors and contractual arrangements. Often, these will need to be renegotiated to align the expiry dates, strengthen the transition provisions and secure rights to disclose information to potential bidders for the new contract. This is critical because disclosing information will enable bidders to propose pricing and service offerings that are not conditional on further due diligence. The customer will benefit from securing the competitive price offered during the bidding stage.

2. Clarifying responsibility

The customer and service provider need to consider factors or circumstances that could disrupt service or cause loss and allocate those risks up front. This will provide certainty for both parties and minimise the potential for disputes down the track. Service providers may not take on certain risks, particularly relating to acts or omissions of third parties. However, accepting the service provider's preferred position too easily will leave the customer exposed to risks that it may have no capacity to manage.

3. Avoiding lock-in

Service providers will be keen to lock in large clients for as long as possible. They will offer attractive pricing for long term contracts, impose significant penalties for early termination and rely on technical disincentives if the customer changes horses. The customer needs to find a balance between reaping the benefits of making a long term commitment and ensuring it has the flexibility to move to another vendor. Maintaining the ability to move to another vendor will help ensure the service provider remains keen, competitive and hungry.

4. Considering contract management and governance

Customers need to consider how they are going to manage their telecommunications contract. This means determining what reports, including content and format, are required. Service providers can produce mountains of reporting data which is often not the information the customer is really interested in.

It should be clear who has the authority to make certain decisions (such as changes to service levels), what forum decisions are made in and what information and reports decisions are based on.

5. Maintaining competitive pricing

Many telecommunication services have been decreasing in price over time. What may be attractive pricing when a contract is entered into, may seem less attractive years later. Contractual mechanisms can ensure pricing remains competitive over the life of the contract, the longer the term the more challenging this is. Benchmarking, pricing reviews and guaranteed price reductions can assist but need to be carefully crafted to be practical and effective.

6. Managing the process of technology evolution

Technology in the telecommunications space is changing constantly. The customer needs to ensure it receives the subsequent benefits of improved pricing and better services. It does not want to be left on the service provider's old infrastructure while newer customers are enjoying the benefits of new infrastructure.

It may suit the service provider to keep the customer on old infrastructure which would otherwise be underutilised. Or the service provider may want the customer to be moved onto new technology, whether it wants to or not, as old technology is phased out. The customer must ensure that it maintains a level of control.

Managing the process of technology evolution over the term of the contract will be critical to the success of the contract.

7. Building flexibility

The whole-of-enterprise contract often means an entire corporate group (which may essentially comprise a range of geographically diverse entities operating in different markets) can enjoy the same services, service levels, pricing and terms. This is where most of the value is gained for the service provider and customer.

As enterprises change with acquisitions of new businesses and disposals of existing businesses, the contractual arrangements should facilitate this rather than being a barrier or hurdle.

Addressing these key issues through the procurement and negotiation process will help customers realise value in their whole-of-enterprise telecommunications arrangements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.