Why do a telecom services RFP?

We’re seeing an increasing interest by Forrester’s enterprise clients to issue RFPs for telecom services. In a review of customer interviews for a Forrester Wave™ study published earlier this year, we learned that just one in five reference customers didn’t expect to issue an RFP for those services when their current contract comes due; more than three times as many expect to do so. The most often cited reasons for issuing an RFP for network and telecom services include:

·         An expired or soon to expire large-scale service contract. When a big contract is approaching expiration, it’s always an opportunity to rethink your overall sourcing strategy for telecoms. Do you want to benchmark the incumbent on pricing models and service delivery alternatives? Do you think you might be better served by multisourcing where you sole-sourced before, or challenging the incumbent to defend their turf against transfer of more of your wallet to another, possibly smaller and lower-margin provider you’re using already for backup or other services? “We haven’t done an RFP for these services since I can remember – maybe 12 years. The provider is also a big customer of ours. But other providers also are big customers. They do a good job, but we’re probably paying too much (a financial services firm).”

·         Paultry renewal bonus, rebate or unit savings offered by a major provider. The provider wouldn’t be surprised to learn you’re going to do an RFP. They might even have told you that they’ve done what they can for you cost-wise each time you’ve done a contract review. They couldn’t do better than about 8-10% overall for a three-year renewal. “Our carrier expects us to pay to migrate off a service they’re not even selling any more. They’re not offering anything in return. If we’re going to change services, we might just as well see what’s out there (a manufacturer).”

·         A sourcing or corporate strategy to rationalize and consolidate vendors. Your business units historically did their own sourcing for voice, Internet and data services. Corporate IT has moved away from best-of-breed technology vendors, and now wants a single global vendor whenever possible. Telecom services, however, remains fragmented. Many clients want to bring it into step with the rest of IT. “I know there’s money being left on the table - potentially a lot. But I don’t have much visibility as to how much because our business is organized geographically. I know the spend for the global WAN, but have no idea for domestic voice and data, except for [country], and I might be able to get the information about mobile services spending for maybe three countries. How sucessful are other manufacturers with this (a consumer goods firm)?”

·         Urgent need for major technology refresh. You haven’t taken your telecoms business out to bid for many years, so don't put all the blame on your service provider for not giving you a (free) technology refresh. You’ve probably beaten them down time and again on service costs, to the point where there’s not a lot of margin left and no expectation of new revenues either. “Yes, we’ve done this. We’re paying maybe a third what we were paying ten years ago for the same about of bandwidth, etc.. We just wanted them to keep the lights on. Now we have plans for some big apps rollouts, and we don’t have anything near the capacity we’ll need; plus our routers are too small. We need an overhaul. Maybe our provider will win it again, but we won't commit anything until we see what's possible (a technology manufacturer).”

·         The fast pace of communications technology change. Many clients are convinced they need to do an RFP in order to achieve overall cost savings and reduce risk with new service delivery models for advanced communications services. “We can’t possibly convince our business to pay for UC just on the basis of promised ‘improved productivity’ and ‘reduced travel.’ We’re hoping that we’ll uncover ways to take advantage of these new services without having to make a case for capital funding (a business services firm).”