Taking calculated risks is something most of us are comfortable doing. We gauge the risk against the downside should everything go south. More often than not, it works out. But ignore these four warning signs and there is NO chance it will end well. And when these IT contract decisions go awry, for the next two to four years, every day will be a painful reminder of what might have been. How do you know your next deal won’t go down a dark path?
Heed these warning signs:
- You don’t have adequate time, staff or subject matter expertise to properly source IT services.
Perhaps you’re lucky and have a sizable team dedicated to negotiating IT infrastructure services globally. Maybe your team completes dozens of advanced IT service contracts every month? More realistically your team is overloaded with daily operational tasks. The time it takes to properly research, bid and negotiate a multi-year IT service contract often takes more cycles than you have available. Maybe it’s not what you do all-day, every-day.
- Your knowledge of the IT vendor landscape isn’t current.
This is the most consistent pitfall we observe. The vendor landscape is constantly changing. Not only providers, but services, terminology and geographies covered too. Add to that the speed of technology change, and it’s apparent that unless your intel is absolutely current, you’re operating at a deficit.
- You don’t know the lowest price for IT services in each geographic region.
This is a biggie. We all want to negotiate for services at the best possible price. Based on 14 years’ experience negotiating IT service contracts, we can tell you it’s rare people get the best possible deal. No matter a company’s size, or sophistication, the absolute lowest price all too often remains elusive.
- You don’t know the right questions to ask IT vendors.
If you don’t ask for it – you won’t get it. Here are some questions to consider: What happens if my business experiences rapid growth? Or worse, what if we have a business downturn? How can I right-size my contract mid-term? What’s the provider’s ratio of support engineers to clients? Can I see an independent review of client satisfaction? Describe in detail problems such as all the outages clients have experienced over the last 24 months? How do we avoid price hikes at the end of the contract? How do we ensure real market pricing on renewals and upgrades? How is material breach defined? What happens if I’m unsatisfied with the service and I want to exit?
You’re Not Alone
There is no shortage of stories detailing the financial and service level perils resulting from poorly executed IT service contracts. In fact, often IT leaders inherit problematic contracts. Global non-profit WorldVision faced this and more with a multi-year telecommunications contract. Mandated to preserve cash for the underprivileged populations they serve, the organization called on IT to reduce operational expenses. One contract with a major telecommunications provider had been negotiated by prior leadership for MPLS and voice services. The contract included more services than needed and delivered outdated technology that was difficult to scale. It also contained a rigid auto-renewal provision. WorldVision called on IT service broker StrataCore to help renegotiate and redesign their telecom service package. The end result was hundreds of thousands of dollars in annualized cost savings and a complete modernization of their voice and data networks.
What Next?
Pitfalls and traps are easy to avoid if you’ve seen them before. A trusted advisor with an extensive experience will make all the difference. StrataCore provides a sure path to avoiding pitfalls, either by assisting you in your IT service contract negotiations or by doing it for you. When you know which providers to consider, what to ask, best practices for negotiating, and the absolute lowest price, you can rest assured you won’t experience any pitfalls. And we think that makes your future look a whole lot more secure.
Aaron Loehr is CEO at StrataCore, Seattle-based IT services broker for data center, cloud, connectivity and security. His mission is to ensure clients have the insight necessary to make informed IT decisions and optimize contract terms and pricing.
Josh Gay is Vice President at StrataCore and is responsible for managing sales and client services.
