Large electric utility companies have power plants that must stay reliably connected to provide essential services, but they also have hundreds — even thousands — of small electrical substations that require high-performance connectivity.
This was the case for one of the largest U.S. utilities meeting the demands of +10M customers spread across a 50,000+ square-mile service area including some rural regions. Telecom expenses represented some of the utility’s largest operational costs, which explains why IT and procurement leaders were laser focused on three telecom contracts coming due for renewal with three big carriers.
The team tapped Tangoe’s Advisory Services to ensure they could lock in the best deals, particularly on one contract (Contract 1), which represented the bulk of their services. In renegotiating, the utility had two primary goals: preserve existing pricing and reduce revenue commitments as much as possible. That wasn’t an easy ask of Tangoe. In addition to fixed wireline and internet services, thousands of plain old telephone service (POTS) lines remained in use, and with POTS prices continually increasing, keeping rates flat for another three years would be a key challenge
Handling over 400 contracts annually, Tangoe’s cost management consultants fundamentally understand the art of negotiation. Here’s how they were able to ground POTS pricing and squeeze every possible dollar of savings from each of the three deals:
Contract 1: Knowing the offer isn’t competitive
Tangoe brought market and vendor intelligence, evaluating current service rates and proposed carrier offers against market-leading pricing structures to identify where gaps existed. This strategy was critical in renegotiating the high-value contract, as it helped the utility put the negotiating power in their court.
Through this savings assessment, Tangoe and the utility could see where pricing fell outside market standards. Targeting their requests, Tangoe’s negotiation artists convinced the carrier that their first offer wasn’t good enough. In the end, the carrier repriced the book of business and lowered revenue commitments without requiring anything beyond renewal at the same 3-year term. Existing POTS pricing remained untouched.
Contracts 2 & 3: Knowing the juice is worth the squeeze
Tangoe’s extensive experience engaging with big carriers guided the utility in knowing where it could get the best bang for their buck. Likewise, they brought a foundational understanding of just how far price reductions could be pushed depending on a given carrier and service type. This was essential in getting quick wins to shave 30% off wireline services and 12% off internet services, but also in giving Tangoe the ability to quickly pivot to areas with higher savings potential.
In knowing how and where to invest their time in renegotiations, the utility signed new deals allowing them to generate a total of $2.7M in contract savings over three years. An estimated $2.4M of that savings came from renegotiating Contract 1, their largest contract which preserved POTS pricing. Renegotiation efforts on Contracts 2 and 3 were also successful, saving $200K by reducing internet service rates and $180K by reducing wireline service rates.
