SD-WAN Negotiations: Do It Now

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The common wisdom has it that during times of crisis, IT should huddle up and wait it out. Infrastructure investments get deprioritized as companies look to conserve cash. Networking is no different. Many of my customers are reporting project freezes, numerous vendors have told me the same. 

But several of my customers are taking a very different approach and using the pandemic to their advantage. Understanding the pressure on SD-WAN and SASE provider sales teams, these companies are using the pandemic to their advantage and exacting big reductions and restructuring of their infrastructure costs. 

One customer of mine, for example, stood to save $300,000 a year by switching to SASE. The project, which had begun before the pandemic, stalled when the provider insisted on a $200,000 one-time charge. The team pushed back but there was little flexibility —  until the pandemic hit. After a few months of sales not closing and POCs being cancelled, the provider proved to be surprisingly flexible. In the end, the provider waived the upfront cost, amortizing the capital expense across the recurring costs for the duration of the contract. 

Restructuring contracts is one thing, but negotiating for reductions is often even more challenging. Often, vendors are reluctant to provide a flat discount on a deal but don’t let that stop you. Look at the specific line items in your deal. Vendors will have little flexibility when it comes to hard costs. Bandwidth fees, for example, are largely fixed by the underlying carriers. The same is true for on-site installation services. They’re normally subcontracted out to third-parties whose fees will restrict the provider’s flexibility to offer discounts. 

Instead, focus on  the soft costs. VPN license, and software costs in general, can often be negotiated as companies are typically not limited by supplier fee or manufacturing costs. The company that offers line monitoring at $100 per circuit with three troubleshooting tickets per month is doing so based on typical customer requirements. There are few fixed costs forcing the provider to charge the full price. Demonstrate to the provider that the assumptions underlying their costing model won’t apply and you’re well on your way to being in a position to negotiate a reduction.

Extracting those kinds of concessions requires leverage and time. I’ve been a big advocate for minimizing the number of participants in a POC for many reasons. You should, though, aim to have at least two and no more than three finalists with great potential to win your business. It’ll let you play them off of each other, provided that you feel their service levels will meet your requirements.. 

To preserve your position, avoid tipping your hand to one vendor or the other. Yes, it’s obvious, but can be surprisingly difficult. Over the weeks and months of an evaluation, team members will naturally develop relationships with the vendors. They’ll work closely with the sales teams and pick their ‘favorites.” They may be inclined to reassure vendors and give them the inside track on the selection process. Make sure they don’t, if you want to retain maximum leverage. 

Finally, be sure to leave yourself enough time to avoid the pressure of coming to a conclusion. To that end, check the fine print in your contracts. . One customer of mine found that a clause in the carrier contract that required a 90-day notice on circuit termination (30-days is more typical). The additional time amounted to a steep overlap for billing the old circuit after new circuits are installed. Planning ahead and leaving time will help prevent those kinds of surprises. 

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