Buying telecom isn’t like buying pencils

For many enterprises, procurements are an exercise in “filling in the blanks.”

It doesn’t really matter what the customer is buying-office supplies, soap, ergonomic chairs-a procurement is just a matter of taking the customer’s boilerplate documentation, specifying the price, type and quantity of the applicable goods or services and-voilá!-there’s the contract.

Telecom is different. Really.

First, telecommunications procurements take on special significance because their importance to the daily operations of enterprise customers far outweighs their cost. Without the wireless and wireline voice and data services that enable email, call centers, websites and other mission-critical services, enterprises literally could not do business. And a protracted outage of a critical circuit costing $500 per month could result in many times that amount in lost sales. As a result, the value of telecommunications services far exceeds their actual cost.

Second, while residential customers can switch providers in a matter of days with just a phone call, switching is much harder for enterprise customers. Large business customers typically execute contracts that commit millions of dollars worth of traffic for two to five years, and early termination carries stiff penalties. Contractual restrictions aside, the process of migrating a large customer’s network to a new provider to another can take a year or longer.

Third, the documentation relating to telecommunications procurements defies simplification. Analyzing contracts requires peeling back layers of documents, including Internet-based “service guides” incorporated by reference that the carrier can change unilaterally without notice. And pricing resides in multiple schedules, many of which can be customer-specific.

Finally, the carriers do business differently. They generally insist on minimum commitments (in one form or another). As discussed above, termination for convenience carries a stiff price. And the carriers know how to spot and exploit an unsophisticated customer. (Hint: it’s the one who tries to insist on an MFN clause or on using its own boilerplate).

In short, telecommunications procurements are unique. That’s why having trusted, savvy advisors is vital.