In recent years, many large organisations have appointed one
service provider for their whole-of-enterprise data, fixed line and
mobile telecommunications. The service provider benefits from the
large amount of money spent by the client and can 'up-sell'
other products and services. The customer benefits from
preferential pricing, volume discounts, key customer status (which
often comes with a range of benefits), and a single relationship to
manage or blame if anything goes wrong.
To gain the full value of these types of contracts the customer
needs to consider the following issues:
1. Transitioning from existing vendors
The customer needs to look at its existing vendors and
contractual arrangements. Often, these will need to be renegotiated
to align the expiry dates, strengthen the transition provisions and
secure rights to disclose information to potential bidders for the
new contract. This is critical because disclosing information will
enable bidders to propose pricing and service offerings that are
not conditional on further due diligence. The customer will benefit
from securing the competitive price offered during the bidding
2. Clarifying responsibility
The customer and service provider need to consider factors or
circumstances that could disrupt service or cause loss and allocate
those risks up front. This will provide certainty for both parties
and minimise the potential for disputes down the track. Service
providers may not take on certain risks, particularly relating to
acts or omissions of third parties. However, accepting the service
provider's preferred position too easily will leave the
customer exposed to risks that it may have no capacity to
3. Avoiding lock-in
Service providers will be keen to lock in large clients for as
long as possible. They will offer attractive pricing for long term
contracts, impose significant penalties for early termination and
rely on technical disincentives if the customer changes horses. The
customer needs to find a balance between reaping the benefits of
making a long term commitment and ensuring it has the flexibility
to move to another vendor. Maintaining the ability to move to
another vendor will help ensure the service provider remains keen,
competitive and hungry.
4. Considering contract management and
Customers need to consider how they are going to manage their
telecommunications contract. This means determining what reports,
including content and format, are required. Service providers can
produce mountains of reporting data which is often not the
information the customer is really interested in.
It should be clear who has the authority to make certain decisions
(such as changes to service levels), what forum decisions are made
in and what information and reports decisions are based on.
5. Maintaining competitive pricing
Many telecommunication services have been decreasing in price
over time. What may be attractive pricing when a contract is
entered into, may seem less attractive years later. Contractual
mechanisms can ensure pricing remains competitive over the life of
the contract, the longer the term the more challenging this is.
Benchmarking, pricing reviews and guaranteed price reductions can
assist but need to be carefully crafted to be practical and
6. Managing the process of technology
Technology in the telecommunications space is changing
constantly. The customer needs to ensure it receives the subsequent
benefits of improved pricing and better services. It does not want
to be left on the service provider's old infrastructure while
newer customers are enjoying the benefits of new
It may suit the service provider to keep the customer on old
infrastructure which would otherwise be underutilised. Or the
service provider may want the customer to be moved onto new
technology, whether it wants to or not, as old technology is phased
out. The customer must ensure that it maintains a level of
Managing the process of technology evolution over the term of the
contract will be critical to the success of the contract.
7. Building flexibility
The whole-of-enterprise contract often means an entire corporate
group (which may essentially comprise a range of geographically
diverse entities operating in different markets) can enjoy the same
services, service levels, pricing and terms. This is where most of
the value is gained for the service provider and customer.
As enterprises change with acquisitions of new businesses and
disposals of existing businesses, the contractual arrangements
should facilitate this rather than being a barrier or hurdle.
Addressing these key issues through the procurement and negotiation
process will help customers realise value in their
whole-of-enterprise telecommunications arrangements.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The issue of recording telephone calls was recently considered in the Federal Court in Furnari v Ziegert  FCA 1080.
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