TotalCIO

May 7 2009   3:57PM GMT

Adding a ‘business downturn’ clause to your telecom contracts



Posted by: Karen Guglielmo
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Telecom providers will do whatever it takes to keep your business, even in a business downturn. And that’s not just lip service.

Did you know that you can insist on a “business downturn” contract clause in your telecom agreements? Many large corporations are spending in the millions on telecom expenses each year. Even the IT organizations that excel at telecom expense management can’t effectively do so when the business takes a hit. For instance, if your company loses a major account or sells off a subsidiary or business unit, a “business downturn” contract clause allows you to reduce your original commitment level to the telecom provider – in terms of spending, rates and/or contract length.

A “business downturn” contract clause can also cover migration to a new technology that possibly reduces the original amount of services covered by your contract. However, “you will want to eliminate language restricting the clause to business downturns ‘beyond the customer’s control’ or to situations in which the customer cannot meet the commitment ‘despite its best efforts,’” advises telecommunications and IT law firm Levine, Blaszak, Block & Boothby LLP on its website. “Such phrases eviscerate any rights that the clause otherwise grants.”

Just last month, TNCI, a national voice and data communications reseller, competitive level exchange carrier and VoIP network provider, announced that it was offering a “business downturn flexibility” contract clause to new and existing customers using its telecom services. The new contract clause is “designed as a method for renegotiating service agreements due to a change in the customer’s business situation as a result of the recession,” according to a statement by company officials.
TNCI isn’t the first to do this and definitely won’t be the last. Telecom providers are feeling the heat of this weakened economy and are doing whatever is necessary to work with IT organizations on managing their telecom spending and services.

Telecom providers ultimately want to keep your business. It’s easier for them to keep a remaining large customer than invest in a new one. “If Verizon has a customer with 1,000 analog lines, it is easier to lower their rates or work with them on their contract, than install 1000 lines for a new customer,” said Michael McCauley, PMP of TelPlus Communications, a managed telecommunications solutions provider. “It’s always much easier to negotiate from a point of strength.”

Whether your telecom spending is managed through IT or an outsourced service provider, adding a “business downturn” clause to your contracts is a smart business decision in bad times.

1  Comment on this Post

 
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  • WRicco
    A couple of examples of clauses with teeth would be very appreciated.
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