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.
- $2M Reduction – 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.
- Cost Increase Reduction – Flat rate T-1 access cost increase was reduced from $45 to $6.
- $4K / mo Savings – 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.
- Pricing Reduction – 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%.
- 20% Rates Reduction – VoIP related rates were reduced by 20%
- 400% Increase in Bandwidth – 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.
- Install Costs Waived – 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.