Article

Wireless rate negotiations: How to get the best deal

Michael Morisy, News Writer
As wireless budgets gain on -- or even eclipse -- landline spending, negotiating favorable cellular plans becomes more important than ever, particularly with more road warriors tapping into pricey data connections.

Enterprises that enter negotiations with a strong game plan can save serious money when cutting a wireless deal.

The average wireless voice contract costs enterprises 13 cents per minute, but savvy companies can cut that to about five cents per minute, according to Kevin S. DiLallo, a partner with the law firm Levine, Blaszak, Block & Boothby, which specializes in telecommunications negotiations for enterprises.

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"It all depends if you don't want to overpay for services and if you don't want to take on extra liabilities [like the risk of users charging consumer services to the company]," said DiLallo, who has worked on behalf of clients like American Express, General Motors, and the federal government. Some of his clients are now budgeting more on cellular plans than on their landlines, he said, making the negotiations particularly crucial. "You just have to know what the pain points are, and you have to have leverage."

Be aware of hidden costs

Increasingly, one of those pain points is data usage: Who gets it, how much, and how expensive will it be, particularly with BlackBerry devices that often come with extra costs like BlackBerry Enterprise Server.

"Most people pay around $45 per month for corporate liable users," DiLallo said. "If they're smart, they can pay $27, $28 per month."

If contracts and policies do not specifically account for consumer-oriented services, costs can balloon unexpectedly as enterprises subsidize games and music downloads. Mobile managers will find themselves paying a premium for consumer services that actually hurt employee productivity.

Much of this financial drain can be avoided, according to DiLallo, if enterprises assemble the right negotiating team and form a game plan before they launch discussions with mobile carriers.

Assemble a negotiating team, form a strategy

The first step is to bring together, a few weeks before negotiations even begin, at least one member from the corporate legal team, the IT department budget director, and an engineer who understands the technical requirements and challenges a corporate mobile deployment will pose.

Having a balanced team ensures that no area of expertise is left uncovered. The budget director's decisions will largely drive purchasing choices, DiLallo said, but often the technical gurus are needed to fully explain the nuances of the technology and how it can affect the enterprise.

The legal counsel is necessary to cut through the dense contractual terms, particularly ones that are not in the actual contract itself but are presented online as an addendum, as well as to make sure that proper language is used to keep carriers bound to their service agreements. "If you have a decent amount of lines, everything is negotiable," said DiLallo.

After that, DiLallo said, the team should have the IT manager report what users are looking for in their mobile needs, what they are unhappy with in the current setup, and what specific features they like or don't like.

While it goes without saying that not all carriers are created equal, corporate strategy could play a large role in deciding which provider to invest in.

Diego Jimenez, a project manager with market research firm Chadwick Martin Bailey, has found through his research on enterprise telephony purchasing decisions that companies prioritize coverage and mobile security well above the best base price.

"These are drivers for one carrier over another, but I don't know what makes them believe that Verizon, for example, is more secure than AT&T," he said. One thing that has not had much resonance so far, outside of small niches with a need for high wireless speed, is 4G and WiMAX services, according to Jimenez.

"There is a drive for staying with the most mature connection," he said.

This is also the time to have a firm understanding of corporate strategy. The team should determine which workers will get devices and how many users the IT budget can support, as well as what types of services IT will be willing to offer end users, like mobile email, GPS or text messaging, which may or may not fit in an organization's strategy.

Don't be afraid to limit employees' options

Once these parameters are decided, DiLallo suggests paring down user options, particularly in regard to devices.

"Discipline is an issue for just about every enterprise customer," he said. "They are pathetic about how they manage their wireless services. For example, they let their executives order iPhones for their businesses."

"I don't mean to be ruthlessly cheap, but come on, an iPhone?" said DiLallo, who suggested instead picking half a dozen devices to purchase and support for employees.

The next consideration in contract strategy is the damage that enhanced data services, like video or music downloads, can do. Best-case scenario -- have these unnecessary services blocked on all corporate accounts.

"There is a lot of pressure, particularly for senior management, to just give people what they want," DiLallo said. "When a company has 50,000 phone lines, I think it is incredibly important to have policies that constrain what the company is willing to pay for."

At this point, many wireless service providers will argue that they cannot control users' data activities, in which case DiLallo suggests at least including a 60-day grace period to cancel services without early termination fees. If a user signs up for ESPN MVP, for example, the mobile manager can order that user to cancel the service without incurring additional costs.

Use your leverage, ask for extras

Be prepared to ask for the perks that will make the service more useful. DiLallo said more and more cellular service companies were willing to outfit buildings with better wireless coverage in a bid to boost minutes used, often without direct compensation.

Negotiating teams should be aware of how much leverage they have and be prepared to use it. This can have a major effect on the final price. A company with 1,000 mobile users has little sway, DiLallo said, but 5,000-user shops have the higher ground in a battle for better rates as carriers vie for their lucrative contracts. To really use that influence, a company has to be willing to investigate and seriously consider alternative providers, something many companies are unwilling to do.

"Incumbency is always huge," Jimenez said. "Companies are much more likely to stay with the provider they are with unless [it is] really screwing up."

But rigorous negotiations can save a company up to 50%, he said. Not considering alternatives could mean leaving serious money on the table.


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