Decide on service level agreements and contract terms. Insist on an acceptable commitment to uptime and response time. Should the provider fail to perform to the standards set in writing, have a clear understanding about how your company's accounts will be credited.

Ask the provider to define an escalation path. This gives you a clear communication route to resolving issues if the account management team or technicians fail to respond to your calls for help.

Watch out for contractual "gotchas." A nasty surprise often comes in the form of a minimum annual commitment (MAC) for consuming a certain amount of long distance time. To stabilize and predict cash flow, telecom companies ask buyers to contractually commit to spending a minimum amount of money over the course of a two-year period or longer.

"They'll sign you up for five years if you'll go for it," warned Ginorio. Don't let them. A MAC can bite you if you don't live up to your commitment--you may have to pay a penalty--sometimes as much as 100 percent of the difference between what was used and the contractual commitment.

Ginorio related the experience of one enterprise that had a contract with WorldCom for a $250,000 MAC.

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"They thought this was less than they were actually spending. But in fact, they were only using $60,000 in voice service per year," he recalled. He added that the CEO was quite upset when he realized that the contract was going to cost the company in excess of $0.5 million in unnecessary expenses over a three-year period.

Other service nuances

The flipside of a MAC clause is a volume cap. These are volume-sensitive discounts that require an organization to pay a higher price if it uses more capacity than it agreed to purchase. The volume cap is particularly punitive in cases where a company grows rapidly due to a merger, acquisition, or market expansion.

Instead, you should ask for a rate review clause. Providers prefer to avoid them because they would rather lock companies into a set rate for the service. But for large and small corporations, rate reviews can reduce the cost of services based on current market rates.

Along with the rate review, you'll want a rate stabilization clause, which guarantees that the rate won't go up if, during the rate review, market rates actually rise.

Keep an eye out for exclusivity clauses that are sometimes buried within a contract--an exclusivity clause makes it impossible to set up telecom redundancies with other providers for the enterprise.

Ginorio offers one final piece of advice--once you're satisfied and have signed a contract, you still have more work to do. Ginorio advises companies to manage telecom capacity like an asset in the company inventory. If no one is reviewing the telecom services on a monthly or quarterly basis, telecom simply disappears into the overhead. When that happens, companies lose the ability to manage the asset as something that can have an impact on profit margin, he said.

Keeping telecom services up requires best practices
First published on August 20, 2002
By David Southgate

What has your company done to ensure reliable telecom service? TalkBack below or e-mail us with your thoughts.
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