By Jeff Hays, Director of IT
Having worked in the IT industry and having the responsibility to work hand-in-hand with a variety of vendors and service providers has provided me with some insight when reviewing contracts or service agreements. I’d like to share a few points which are commonly overlooked. These points do have the potential to maximize a company’s long term IT investments.
Know the contract start and end dates. Quite often, we don’t have any idea of what will happen as we approach the end of a contract. I would suggest asking yourself the following questions when reviewing your contracts:
- Will your service provider continue to bill you at the same rate once the contract has matured?
- Is there any potential for a service disruption causing loss of employee productivity?
- Do we need to provide advanced notice that the contract is not to be renewed?
- Will this contract be auto-renewed?
Auto-renewals are become standard in contract terms these days. In my experiences, this is not a positive contract term for the customer. When a contract has auto-renewed you lose the ability to shop for a better deal. At the rate that technology advances, this could prevent a company from being able to leveraging up to date technology for services such as your Internet connection and telephone services. It also prevents a company from having an opportunity to reduce fees for such services since they will keep the same rate for the service which may have a reduced market value. Telephone and Internet services are traditionally competitive markets and one can almost always find a better deal two or three years from the time the original contract was signed. When renewing a contract, it is one of the few times to obtain leverage over a vendor.
What happens when a contract is in need of early termination? Often there is an additional fee that will be charged in place of or in addition to the remaining value of the contract. When working with a tier 2 or tier 3 telephone or Internet service provider, you should be aware that they are, in fact, leasing a circuit from a tier 1 provider such as AT&T. To terminate a contract early means tier 2 or 3 providers would incur charges from the tier 1 provider, which they will assuredly attempt to pass along to the customer.
I’ll leave you with one last point. Remember that each contract is an agreement between two parties. Don’t be afraid to ask for certain terms or to have terms such as auto-renewal removed from the contract. Ultimately, a little time spent up front can reduce IT investment fees by minimizing or understanding hidden fees, provide an opportunity to renegotiate fees at the end of a contract or even help minimize the loss of productivity.