THE ANATOMY OF A CONTRACT RENEWAL

THE ANATOMY
OF A CONTRACT
RENEWAL
A dissected view of contract renewals
between enterprise customers and telecoms
service providers
March 2016 | Mandar M. Mungee

INTRODUCTION
Buyer-seller relationships are fast becoming a thing of the past in the enterprise telecoms business. Mutual,
sustained benefits are more likely to be reaped in a partnership approach rather than a vendor-purchaser relation.
However clichéd this may sound, a partnership, much like a marriage, has the potential for better persistency and
progress since it entails investments from both the parties for collective and mutual good.
Like in any partnership, relationship between the telecoms service provider and the enterprise too evolves over
time. In this journey, a contract renewal is an event which presents the partners with an opportunity to reflect on
their relationship for the period gone by, identify strengths and weaknesses, and adjust themselves for a stronger
association in the future.
If executed well, every renewal has the potential to redefine and strengthen the partnership. Careful consideration
of all aspects pertaining to the contract in the context of the larger association between the organizations helps in
a successful renewal. Conversely, there are some common pitfalls which need to be avoided for a contract renewal
to deliver a win-win outcome for all the parties involved.
CONTRACT RENEWAL: TIS' THE SEASON FOR
PROTECTING, SHOPPING AND HUNTING!
A contract renewal is an event which usually evokes
different actions from the parties involved:
Ÿ The service provider’s protection instinct is triggered
Ÿ The enterprise customer tends to go around
shopping for options
Ÿ Prowling competition sets off to hunt out the
incumbent service provider
Every telecoms service provider worth its salt closely
tracks the renewal due dates of its competitors’
contracts with prospects/customers. Structured
competition churn programs are run by most service
providers, targeting upcoming renewals of competitor
contracts. Incumbent service providers should be wary
that their business is more vulnerable to being
churned out by competition in the run up to the
contract renewal.
Predatory pricing, breakthrough bespoke solutions,
business reciprocity, etc. are some of the common
levers engaged by competitors to break into an
incumbent service provider’s stronghold. However
tempting the competing offers may seem, customers
have to exercise due caution and discretion while
evaluating them. One false step and it could well end
up as a case of being ‘penny wise, pound foolish’.
Before the enterprise makes any decision to switch
partners, it should conduct a detailed scrutiny of the
long-term commitment of the competing provider in
the context of the customer’s business objectives.
There have been quite a few cases where the cost,
complexity and effort of change have had a
debilitating effect on the customer’s business, often
forcing a rollback to the original partner.
“Every renewal has the potential to
redefine and strengthen the
partnership."
The incumbent service provider should flank
competition by pre-empting all possible competing
moves in the renewal proposition. Strong market
intelligence, deep competitive research and sound
account engagement are the key factors in
successfully dealing with competition during contract
renewals.
BEHIND THE SCENES: WHAT'S-IN-IT-FOR-ME?
Especially in the enterprise business, customer
experience is delivered, measured and perceived over
a period of time. The engagement between the
customer and the telecoms service provider during the
tenure of the contract plays an important role in the
renewal process. The partnering parties bring to the
renewal discussions their experiences and learnings
gained during the tenure of the contract. These, along
with the prevailing business drivers, form the basis of
renewal discussions.
Customer: Some of the objectives which an enterprise
customer seeks to achieve during a contract renewal
are:
Ÿ Reviewing the value delivered by the service provider
Ÿ Rewarding and/or penalizing the provider based on
performance
Ÿ Optimizing/upgrading the solution to align with the
changed conditions/requirements
Ÿ Adjusting the contract to drive good governance and
best sourcing practices
If you have any comments, questions or suggestions about Contract Renewals,
please email us at mandar.mungee@tatacommunications.com
© 2016 Tata Communications. All Rights Reserved. TATA COMMUNICATIONS and TATA are trademarks of Tata Sons Limited in certain countries. 33596v01
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Telecoms Service Provider: During a contract renewal,
a provider is guided by some of the following drivers:
Ÿ Protecting existing revenues from eroding
Ÿ Unearthing opportunities for additional revenue
generation
Ÿ Discontinuing unprofitable contracts
Ÿ Ensuring timely closure of renewal for First Time
Right (FTR) billing, timely receipt of Purchase Order
(PO) to facilitate smooth Accounts Receivables (AR),
etc.
WIN-WIN OUTCOME: THE WHOLE IS GREATER
THAN THE SUM OF ITS PARTS
While each of the stakeholders come to the table
during the contract renewal with their own agendas, a
sincere recognition of the other party’s objectives,
demonstrated through words and actions, helps stitch
a winning renewal deal.
A typical contract renewal exercise between an
enterprise customer and a telecoms service provider
has 3 broad stages:
“A truly evolved renewal discussion
aims to deliver enhanced business
outcomes for the enterprise through
service provider's thought leadership.”
Each of the stakeholders have a role to play across all
the stages to deliver a winning outcome. A renewal
discussion should go beyond price protection,
discounting or even value from the service (i.e. service
quality to price ratio). A truly evolved renewal
discussion aims to deliver enhanced business
outcomes for the enterprise through service provider's
thought leadership. When business value
enhancement is the theme of the renewal discussions,
it signifies the coming-of-age of the relationship
between the service provider and the enterprise.
Some of the do's and don’ts for both the parties
during various stages of renewal are as follows:
1. Preparation
2. Negotiation
3. Documentation & Closure
A) Enterprise Customers
Stage Do's Don'ts
Preparation Ÿ Freeze on the key decision points to be considered during the
renewal
Ÿ
Ÿ
Ÿ
Conduct price discovery/benchmarking exercises
Compile a report card showing the performance of the service
provider
Seek ways of leveraging the renewal to improve business
outcomes
Ÿ
Ÿ
Do not delay the kick-off of
the renewal process
Do not depend solely on
the service provider for the
data points/information
Negotiation Ÿ Budget enough time for commercial discussions
Ÿ
Ÿ
Ensure fair and equal comparisons
Co-opt all the relevant functions viz. Business, IT/Technology,
Sourcing, Finance, etc.
Ÿ
Do not let the drive for
discounts compromise
other important
considerations
Documentation
& Closure
Ÿ
Ÿ
Understand documentation requirements and timelines
Ensure availability of approving authorities for timely
documentation and closure
Ÿ
Do not compromise on the
diligence in documentation
NOTE: In addition to the above mentioned points, the enterprise should also explore the option of hiring external
consultants/experts and evaluate supplier relationship management systems. It is crucial to understand that
renewal is as important as a new order.
If you have any comments, questions or suggestions about Contract Renewals,
please email us at mandar.mungee@tatacommunications.com
© 2016 Tata Communications. All Rights Reserved. TATA COMMUNICATIONS and TATA are trademarks of Tata Sons Limited in certain countries. 33596v01
3

B) Telecoms Service Providers
Stage Do's Don'ts
Preparation Ÿ Proactively initiate renewal discussions
Ÿ
Ÿ
Ÿ
Ÿ
Ÿ
Ensure availability of robust data
Define exact scope of services to be renewed
Ensure proper diligence of commercial and non-commercial
metrics
Pitch propositions aimed at enhanced business outcomes for
customers
Marshal relevant stakeholders viz. Sales, Commercial, Product,
Legal, Service Assurance, Solution Architects, etc.
Ÿ
Do not defer renewals for
short term revenue
protection
Negotiation Ÿ Budget enough time for commercial discussions
Ÿ
Ÿ
Ÿ
Focus on customer business outcomes and service value
Consider the larger business relation with the customer
Ensure that the differential between the first quote and final
quote is not significant
Ÿ
Ÿ
Ÿ
Do not allow glaring
disparity in pricing for
comparable contracts &
relationships
Do not underestimate
competition
Do not bow to undue
discounting pressures
Documentation
& Closure
Ÿ
Ÿ
Clarify documentation requirements and timelines
Set up ‘Renewal Green Channel’ to facilitate quick renewal
order processing
Ÿ
Do not de-prioritize the
processing of renewal
orders
NOTE: In addition to the above mentioned points, telecoms service providers should incentivise the team(s)
responsible for renewals and invest in people, processes and platforms with an aim of improving the renewal
process. Providers should design and promote renewal-specific upgrade, up-sell and cross-sell propositions. It is
advisable to discourage a culture of auto-renewal of contracts.
SUMMARY
While it may not enjoy the same limelight and fanfare as its more illustrious peer i.e. new order, a contract
renewal is no less important an event for all the parties involved. It is a significant milestone in the
partnership and deserves due importance from the contracting parties. Adequate preparation, sincere
appreciation of mutual objectives and time-bound completion of paperwork go a long way in a win-win
contract renewal. A mutually-beneficial contract renewal is the one where the aspirations of the enterprise
converges with the thought leadership of the service provider to deliver enhanced business
outcomes. Progressive and partnership-oriented service providers and enterprise customers are the ones
which truly believe that “A relationship renewed is a relationship strengthened.”
ABOUT THE AUTHOR
Mandar M. Mungee is the VP & Head - Renewals & Retention Management for the Enterprise
business at Tata Communications. Having over 23 years of experience, Mandar has been
associated with the telecoms industry for almost two decades. His area of specialization is
enterprise telecoms and network outsourcing. Mandar has successfully executed leadership
roles in key customer-facing functions like Pre-Sales, Sales, Receivables Management,
Program Management, Customer Service and Consulting.
If you have any comments, questions or suggestions about Contract Renewals,
please email us at mandar.mungee@tatacommunications.com
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© 2016 Tata Communications. All Rights Reserved. TATA COMMUNICATIONS and
TATA are trademarks of Tata Sons Limited in certain countries. 33596v01
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