Renegotiation of IT and Telecom Contracts – It generates cost reductions and service quality improvements

The IT area is an important part of a company’s business.

The IT area is an important part of a company’s business, whether to deliver products and services or as part of the corporate structure for carrying out its activities.

With this growing importance, several services ended up under management of the Information Technology area, generating high demand for better quality of service, high availability, optimization of resources and a large mix of assets and suppliers to be managed.

Centralizing the management of contracts can make the manager’s day-to-day simpler and more accurate. It can also bring financial gains through avoidable costs or through revenue recovery from non-compliance with service levels and/or contracted tariffs and prices. These gains also include the planned renegotiation of contracts maturing in the near future.

Key points for a good renegotiation

Renegotiating IT and Telecom contracts is an important step to reduce a company’s costs. It is common to find services that are not used, are underutilized or even used more than what was contracted, generating unnecessary costs.

RFP (Request for Proposal) Preparation

An RFP with technical and commercial terms well defined, well documented and structured, based on the current usage profile of the enterprise, including specific needs of each area of ​​the company, in a comprehensive way, is the starting point of a successful contract negotiation. When the target pricing is achieved, one can focus on improving service levels, optimizing resources or reducing costs – or even all of those points altogether, in the best-case scenario.

The RFP must include a detailed scope of what is being contracted, a description of the implementation and delivery process, well-defined SLAs addressing the company’s needs, as well as the main contractual conditions.

This document is very important for the success of a supplier choice. It needs to be well written and to include all operational, financial and legal obligations, in addition to penalties and SLAS.

Analysis and negotiation of proposals

After receiving the proposals, they must be equalized and compared to what was requested in the RFP, making sure that each supplier is able to meet the specified technical and legal requirements, as well as deadlines and values.

It is important in this phase to define the primary parameters for a future contract, which result from a detailed analysis of what each competitor presents, its positive and negative aspects and giving weight to each one, including the value presented. This first step defines the suppliers participating in the competition.

Price targets should be established for RFP participants when necessary, especially if few proposals fit what the company understands as essential for contracting within the available budget. K2A is able to conduct an in-depth analysis of the values ​​practiced in the market versus what is used by its clients and what are their technical needs. Our firm accelerates this phase and makes it more productive, ensuring that the contracting process takes place within the best practices.

Hiring the ideal supplier

After the equalization of proposals, the presentation of target values, the conclusion of negotiations and the definition of a supplier, the contracting process begins.

The contract must be detailed and must cover all negotiated points, whether legal, financial, operational or administrative. With everything documented and agreed between the parties, the contract implementation and management begins, another K2A specialty.

Negotiation or renegotiation success

The success from start to finish of a contract negotiation needs a clear definition of what the company needs in terms of delivery and budget.

Many corporations, despite having an experienced purchasing area, hire specialized companies to conduct the renegotiation process detailed above. They do this as an additional tool, relying on market experts who bring agility, precision and the assurance to get to a contract with the best delivery and cost. They also have additional help in monitoring the implementation of new contracts, avoiding the corresponding “headaches”.