Maximising value from your telecommunications and technology contracts

Background

Organisations are increasingly transforming their technology and telecommunications estates so as to increase business efficiency, comply with regulatory change, or to keep step with technological innovation. As service providers look to differentiate themselves in an increasingly commoditised market, they will offer additional services that promise material additional value. Service provider agreements will include value propositions such as:

  • Managed service type agreements, with service providers sharing the risk of the service provision, holding increased responsibility for continuation of service or break/fix;
  • Obligations on service providers to test and evidence the market competitiveness of the service and solution pricing, and remedying the commercial agreement if it’s not seen as best value;
  • Service providers sharing the capital burden of infrastructure so customers tie up less working capital, including investing in customers via subsidies or offering financing;
  • Greater quantities of services for less money, including bundling of peripheral services for free; such as service managers, free replacement of infrastructure equipment, or increased SLAs for break/fix;
  • Fewer contractual commitments including the flexibility for the technologies to be ramped up/down, novated or cancelled, without punitive measures, so as to support growing and changing organisations.

Some of these additional benefits are becoming less tangible, and therefore harder to quantify and enforce. An organisation must therefore ensure that these additional benefits are in fact of value and if they are, delivered in accordance with the expectations of the business case.

 

Key challenges

Many of the promised benefits will fail to materialise if not contracted to correctly or actively managed throughout the contract lifecycle. In fact, many service provider contracts rely on this and include clauses designed to recoup this added value. As such, customers need to understand and negotiate the commercial levers within their agreement to ensure this value is realised. Key questions that executives should ask their commercial and contracting teams include:

  • As a function of shared risk, how can the appropriateness and enforceability of the service provider’s SLAs be tested, and will the SLAs contracted to deliver the quoted benefits?
  • After securing a managed service, is the organisation now over-reliant on that provider and could they be replaced whilst ensuring service continuity (avoiding vendor lock-in)?
  • How will the solution be benchmarked against the market, when additional free services and intangible benefits are creating ‘unique offerings’?
  • How can the contract be managed ‘in-life’ to enforce the service provider’s obligations? What is the recourse for dispute and will the mitigations result in a return to a net-neutral position?
  • Does the agreement give the ability to change the service requirements within the commitment period and are there resulting penalties which may constrain business change or growth?
  • Is there clarity over the service providers’ investments and, as the customer, what rights exist over the funds received or assets financed?

Failure to effectively contract to and manage these areas of an agreement can result in a punitive arrangement that fails to support a customers’ business nor provide value for money.

How we can help

Our Commercial Assurance specialists have many years’ experience on both the buy side and sell side of telecoms negotiations. We work with clients through strategy, scoping and service provider selection and provide independent challenge and scrutiny during commercial and contractual negotiations. Our approach combines industry experience, best practice and commercial assurance rigour, and our specialists will work hand in hand with the client service delivery teams, procurement and legal advisors with a view to implementing a contract that maximises client value.

Contact us

Qadir  Marikar

Qadir Marikar

Partner – Commercial Assurance National Lead, PwC United Kingdom

Tel: +44 (0)7718 928344

Richard E Gott

Richard E Gott

Partner, PwC United Kingdom

Tel: +44 (0)7881 612572

Jonathan Calver

Jonathan Calver

Senior Manager – Commercial Assurance, PwC United Kingdom

Tel: +44 (0)7725 445892

Adam Turnbull

Adam Turnbull

Senior Manager, Commercial Assurance, PwC United Kingdom

Tel: +44 (0)7540 859 164

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