Audit and Re-negotiation Case Study

 

Large insurance company, with 400 sales offices, engaged Telmac to help re-negotiate their current services contract renewal.  Complicating this process were the following issues:

  • Carrier had offered to renew current contract with 10% increase over current costs, eliminating current Term Volume Commitment (TVC) contract with an annual commitment contract, with a 30% increase in annual spend commitment.
  • Carrier was trying to raise current flat rate T-1 access pricing by 23%
  • Carrier was offering non-competitive rates for upgrading Sales office bandwidth from 384K to full T-1, which would increase Customer current cost over $50K per month.
  • Carrier had a $1.35 million sub-commitment for VoIP services.

Engagement Type:  Fixed fee, with Savings Guarantee, additional savings bonus incentive

Savings Guarantee:  200% of fee-based on first year savings.

 

Results 

  • Current TVC format was maintained with nearly over $2 million reduction in vendor proposed spend commitment.
  • $1.35 Million current sub-commitment was eliminated for voice/VoIP services.
  • Flat rate T-1 access cost increase was reduced from $45 to $6.
  • The $6 increase in T-1 access cost was offset by negotiated elimination of cost for current MPLS Class of Service (COS) rates.  This turned a $20K/mo. rate increase to $4K/mo. savings.
  • Prices for all MPLS ports were reduced. T-1 ports were reduced by 50% over current cost.  All ports above T-1 were reduced by at least 20%.
  • VoIP related rates were reduced by 20%
  • Total cost for T-1 sites was additionally reduced.  This effectively reduced the cost to upgrade a 384K site to T-1 for $37/mo., while providing a 400% increase in bandwidth.
  • General waiver of all new install costs.
  • Preservation of current contract terms, e.g. rate review language, which Vendor tried to remove.
  • Bottom line cost savings (including tax and surcharge savings) of ~$30,000 per month for existing services, with an opportunity to mitigate over $50,000/mo. in migration cost to full T-1 bandwidth at sales offices. This upgrade cost was now less than $15,000/mo., which was essentially covered by current cost savings.
  • ROI over 300% in the first year, over 1000% over the contract term, relative to Telmac’s fee.