The following is a guest post by TC2 Asia-Pacific managing director Joe Schmidt, who is based in Singapore.

If you're a buyer of wireless services, which has a higher priority in your decision process, the carrier or the device?

For buyers who negotiate enterprise deals, the answer has always been the carrier. But lately, due the runaway success of Apple's iPhone, as well as Apple's exclusive iPhone relationship with AT&T and company executives demanding "I want an iPhone," enterprise buyers are wondering whether to reconsider their approach to buying wireless services.

Wireless services and the use of smartphones, such as the BlackBerry and now the enterprise-ready iPhone, continue to gain strategic importance in the enterprise. By reading the recent earnings announcements from AT&T and Verizon, it's also clear that wireless services are a significant growth area for the carriers.

Both carriers added net new subscribers last quarter -- AT&T added 2 million and Verizon added slightly less at 1.2 million. What's more, both indicated they expect wireless revenue to continue to grab a significantly greater share of their corporate revenue. And that's particularly due to the demand for smartphones and the use of wireless data services, which are markedly more profitable for the carriers once they get past the initial marketing expenses.

But dig deeper into these earnings announcements and you begin to see how dominant the iPhone has become and why enterprise buyers are likely feeling some pressure to alter their procurement approach. Of the 4.3 million smartphones added to AT&T's network in the third quarter, nearly 75% were Apple iPhones. And, according to AT&T, nearly 40% of those iPhone activations were from customers new to AT&T.

How many of those new subscribers do you think said, "I want an iPhone, so I'll subscribe with AT&T" rather than "I'd like to subscribe with AT&T and I'll take an iPhone please"? My guess is that it's probably a lot more of the former than it is of the latter.

So, we know devices do matter, but can enterprises take this same approach -- select a device first and sign up with whatever carrier supports it? Not so fast -- not if you expect to negotiate a competitive agreement with your wireless carrier.

The moment you put the device before the carrier is the moment you lose your leverage, your ability to negotiate market-leading pricing and commercial arrangements, and your ability to influence operational support. You eliminate the healthy tension caused by having multiple suppliers trying to win your enterprise business. You end up having only one default carrier choice -- the carrier that has the exclusive device relationship.

Think of it this way: Making your enterprise wireless buying decision based on the availability of the iPhone, or any other carrier-exclusive device, is akin to jumping off a building, being told you're in trouble, and then responding that, no, so far you're doing alright. Trust me, at some point your decision is going to hurt.

What you do want to do is make sure you have a real-time handle on the behavior of your user base as you go into the buying process. This suggests monitoring not just the device market per se but also the burgeoning wireless applications market. When you consider that Verizon Wireless is bringing out mobile devices on Google's Android operating system and mobile application platform, and that Apple is now broadening its iPhone availability in the U.K. from one exclusive carrier (O2) to two more (Vodafone and Orange), you can see what's coming down the pike.

It's absolutely fair to demand that carriers support the specific mobile capabilities your base expects without premium pricing, given that a wireless-device rollout under the guise of a corporate-liable deal is itself a marketing function on your part. But as the major carriers sort out their mix of 3G/4G coverage and hardware/software offerings, you should be able to play them off against one another in procurements if you don't get laser-focused on only one device.

Our advice to buyers of enterprise wireless services right now is to continue to evaluate and select your wireless carrier based on the merits of the carrier, its network, its pricing -- and then also its ability to support your enterprise mobility program. Look for carriers that offer a broad array of devices, since smartphones and the applications that run on them are clearly important to the enterprise.

And remember, nothing lasts forever, so when AT&T loses its exclusive iPhone advantage in the U.S., which it likely will in the coming months, you'll be glad you didn't blindly jump while the market was rapidly evolving. We'll be following these developments closely.

If you got a memo today from a senior executive in your company ordering you to get rate reductions from your principal carrier right now -- and never mind when your contract actually terminates -- could you do it?

An equally interesting question is: What would you have to give up to get it?

On the surface, many people would say that it's becoming more difficult to achieve mid-contract rate reductions. That's because carriers are becoming markedly stingier about rate review clauses. In many cases they're refusing to offer rate reviews in new contracts. In other cases they're offering rate reviews, but not annually.

That's leading to silly proposals such as offering an 18-month rate review on a 2-year contract -- silly because if you're negotiating a rate review rather than a new contract six months out from termination, something's wrong.

But looked at another way, instant rate reductions are very doable right now. That's because carriers have ramped up their activity in pre-emptive contract extensions and new term agreements with customers who are well short of termination.

Such activity appears to "solve" an additional problem that's been plaguing users in 2009 -- the recession. But that's led many people and organizations into a survival mode of thinking.

Think about it: rate reviews and pre-emptive contract extensions may both appear to be dealing with straight dollars, but the logic of the ongoing relationship is reversed in each. In a well-structured rate review, rate reductions occur because the carrier is fearful of having your commitment to it reduced. In a pre-emptive new contract term driven by the carrier, the carrier very often gets your commitment increased -- via length of term, percentage of spend obligated to the carrier in a MAC, even pseudo-exclusivity clauses that effectively prevent you from seeking competition.

One of the main points we make with corporate users is that there is a continuum of contracting tools that are available at any given time. For example, if there's a trend to scale back rate reviews, there may also be a trend toward term (rather than annual) dollar commitments. Regularly retiring a term commitment more than a year early has much the same (if not better) impact than rate reviews, because it knocks out the final year's obligation and you are regularly free to "discover" the market via competitive bids.

But in today's environment, carriers love to mask this exploration of counter-trends with what my colleague Ben Fox calls "new temptations" such as slightly lower pricing and credits that end the search for competitive contract terms and market-based rates.

These themes are explored in a major piece that Ben has authored for our friends at VoiceCon and NoJitter.com called There Is Only One Sure Way To Get The Lowest Possible Telecom Prices. Ben explains how you can change the toolbox that your carrier is using if you 1) don't get stuck on a single trend such as the decline of rate reviews, and 2) know how to introduce competition even under the pressure of today's economy.

All of us at TC2 have experienced how the carriers have two entirely different sides -- Ben calls them the Dr. Jekyll and Mr. Hyde personalities latent in each carrier -- when you change the discussion in this way. Ben also discusses the internal management challenge of positioning your organization to face Dr. Jekyll when your executives and peers may be unwittingly setting you up for a date with Mr. Hyde.

Simultaneously dealing with the external and internal pressures on your job is a major theme of this blog, and Ben's article deals in depth with the very situation that many users are facing right now. Check out the piece and let me know any of your thoughts as well.

The following is a guest post by TC2 Asia-Pacific managing director Joe Schmidt, who is based in Singapore.

Mobile Device Management (MDM) is a conundrum for enterprises that provide smartphones and other mobile devices to their employees, or who allow employees to access company resources using mobile devices. At TC2 we've been advising clients to pay attention to this burgeoning support requirement and to take steps to implement a solution, or risk exposing the enterprise to security breaches and support issues down the road.

It's certainly a major consideration in the more-developed regions of Asia, where wireless device deployment is almost universal and user demand for mobile business applications functionality is pervasive. As a result, last week's Mobile Device Management Asia conference in Hong Kong, where I spoke, was heavily attended by handset manufactures like Nokia, regional service providers such as Optus from Australia and Maxis from Malaysia, and third party MDM software and service providers. And it provided a great window into what's coming down the pike globally, especially as smartphone use displaces older devices in many vertical industry markets.

What was clear from the presentations and my discussions with attendees is that MDM is being targeted at the enterprise market. But one key hinge point I'm watching is whether the service providers and device manufacturers are using MDM more to support the enterprise or more to grow their own revenue by selling applications and value-added services.

After the founder of the Device Management Forum gave his opening remarks, he launched into a presentation on the evolving landscape of MDM in the enterprise. The main points of his talk were that in order for MDM to deliver business and end user benefits, it must be able to acquire, configure, deploy, secure, and maintain mobile devices.

He went on to say that the key players that have emerged in the MDM market are the mobile service providers, device manufacturers, and third party software houses and integrators. Many of those players followed on with presentations on the latest developments in MDM.

These presenters explained how MDM can provide over-the-air software updates and how their products and solutions can remotely lock a device or wipe it clean if necessary. The MDM providers elaborated on the level of information that can be loaded and maintained for a device, including a device's operating system, the applications loaded on a device, how the applications are used, and even the location of where a device is used.

But one service provider openly explained how it is using the massive amount of data it captures to build life logs of each subscriber. It then uses the logs to create marketing campaigns and promotions targeted at the subscribers. That's fine for them, but what does it do for you? Well, one of the reasons the conference producer invited me to speak was to "keep it real" and to let the audience know what enterprises really want when buying mobile services and to provide the enterprise's view on MDM.

I told the audience that mobile services are indeed strategic to enterprises and that demand would continue to grow, thanks to the proliferation of smartphones and the expansion of high-speed wireless networks. I said that MDM ranks very low on an enterprise's list of requirements when initially buying mobile services, but that MDM does hit the radar screen once a deal is done. I explained that enterprises grapple with tough questions when they consider supporting an enterprise mobility program, such as:

-- How can enterprises permit user choice while enforcing corporate governance?

-- Are mobile applications productivity enhancers or security threats?

-- Where should MDM stop and user privacy start?

My takeaway from the conference and what I've seen while helping clients procure mobile services around the world is, like it or not, if you're an enterprise that uses mobile services, you're going to need to understand MDM and eventually you'll need to implement a solution. But before you do, make sure you define your mobile strategy, then develop and implement mobile policies that address corporate vs. employee liable plans, entitlement and reimbursement, acceptable use, demand management, support, and security.

If you take these steps first, you'll have a better understanding of the type of MDM solution that works best for you and your users -- and that enables most of the benefits you're paying for to flow in your direction. We'll be keeping tabs on this key emerging support requirement and invite your comments as well.

A general principle of effective telecom procurement has always been that the broader the basket of services, the better the offers -- up to a point. That point is reached when you go beyond the boundaries of what a discrete set of bidders can bid on by virtue of their footprint or skill sets.

As a practical matter, we've seen two such boundaries for some time. One is the split between domestic and global services, because the lineup of bidders is likely to be different for each. The other is between wireline and wireless, because the product houses within the big carriers (other than Sprint) have non-parallel service platforms and discount structures between their fixed and mobile services, and simply haven't wanted to combine the two under a single agreement.

We're always on the lookout for shifts in this area, and we may be on the verge now. AT&T has been talking to some of its big customers about pulling together wireline and wireless services for one mega-commitment, with various promised or perceived concessions on the resulting deal.

We haven't really seen this activity at Verizon, perhaps because it shares ownership of Verizon Wireless with Vodafone, but we still wouldn't be surprised if we see Verizon broaching the idea of combined commitments to select customers sometime soon. And we also wouldn't be surprised if you and your IT-related colleagues get press and market research reports asserting that you can get bigger wireless discounts and a better wireline deal through combined MACs. We recently saw one such market research report purporting to define the amount of additional corporate discount percentage points you can achieve on wireless plans by rolling up enterprise wireline voice and data spend into the same deal.

It all sounds promising, but in the real world there a few things to watch out for. In our experience, you have to look closely at combined MAC offers to see whether they're really better or if it's a mirage. The initial presentation of a combined offer may be a very high-level description that has the air of "It's combined, isn't that great? It must therefore be better, right?" Basically you have to move carriers from offering a combined deal for its own sake to doing a combined deal that is in fact a better deal. It may take several rounds of discussion and bidding to do so. If there ever were a type of deal that shouldn't stop at Round 1, this is it.

In particular, you have to make sure that the key details of the "better" combined offer are not the ones you would have received otherwise, and that the "worse" separate offer is not a stalking horse that you never would have seen (or signed) in the first place.

Market-based rate benchmarking clearly comes into play here. We've seen situations where a carrier has proposed different rates on a key wireline rate element (such as high-volume voice toll price point or a typical data port speed) based on combined vs. separate commitments, but the price point under the separate commitment deal is so far out of market that we doubt we would have seen it at all in the absence of a supposed choice between separate and combined deals. That's no better than a phony "sale" at a retail store where the list price is at a level that no one actually pays for the product.

Next, examine the combined MAC itself. The first instinct of carriers seems to be that if your wireline commitment is $X million, and your wireless commitment (if expressed as a spend rather than number of devices) is $Y million, the correct combined MAC is $X+Y million.

But think about that for a minute. Combining commitments without a "haircut" doesn't lower your risk of either a technological or business shift that forces a sudden reduction in the spend of one of the component services, risking shortfall. Indeed, it raises that risk.

The carrier may respond that the combined deal also increases the number of services available to replace the spend through growth, but can you really guarantee in today's environment a set level of growth in any of your key services if one falls off? That's basically what you're guaranteeing under these scenarios. Obviously, the combined-commitment concept should be explicitly used to increase your cushion, and any combined commitment should be for less than the sum of the separate commitments.

Even worse, we've seen initial proposals that appear to total up actual wireline and wireless spend (rather than separate MACs) into a mega-MAC, or do so with a very churlish discount, providing almost no cushion. That completely defeats the purpose of combined commitments. We're actually not sure whether this is a result of the carrier trying to snow the customer, or whether it simply reflects another reality of combined MACs -- the carriers are just getting going on this concept and their initial documents on it can look like they were put together on the back of a napkin. Look for inconsistent language in labeling offerings, basic math errors and the like. When you see those, tell the carrier it will have to polish its work before you can consider it seriously.

Finally, consider whether the carrier is playing a game of misdirection here -- simply stringing you along on the annual-commitment concept by making it sound more comprehensive when there's actually a more important trend to consider: term commitments. A single term commitment that can be retired 1 1/2 to 2 years into a three-year contract may be much better (for your leverage and competitive position, and therefore your pricing over the medium run) than any annual commitment, no matter how broad.

I'm not knocking the possibilities here. In fact, it's almost inevitable that the combined MAC trend will grow, because from industry standpoint wireless is currently standing tall on margins, profits and growth, and the carriers should be motivated to find great deals for their best customers by cross-checking everything you spend. Plus, the reality is that end-users often take wireline voice and data for granted but demand a lot of value-add on wireless, and you should be able to play your big carriers' assertions on competitive differentiators for a great total deal. Finally, we also know that in certain regions of the world, such as parts of Asia-Pacific, such combined deals have already taken hold.

The guinea pig principle is very much at play here. It's early in the process for combined wireline/wireless MACs. Make sure that the benefits are tangible, not just implied, before you become one of the early adopters of this contracting trend.

READ THIS! Has that ever been the title of an email you've received from a senior manager or a lateral peer in your company, with a link to an article from the financial press about one of your suppliers, maybe even your lead carrier?

Betcha it has. Telecom managers don't have the luxury of buying primarily from niche, specialized players of interest only to the trade press. Our key suppliers are some of the biggest brand names in America -- Verizon, Sprint, and of course the quintessential brand name of them all -- AT&T. So you don't always get full control over the messages that key colleagues get about your chosen suppliers.

Trying to manage the flow of public buzz and concern about these vendors has taken up an increasing amount of time for professional telecom managers in large companies. But it's an important management task that must be handled proactively.

It's in this context that a TC2 client forwarded an article posted on Yahoo Finance by a sort of financial audit firm. The article was called "Ten Big Companies That Are Veering Toward Bankruptcy" and one of the companies cited was Sprint.

The article's overall and accurate point was that bankruptcies can occur when three bad things collide -- high debt, a poor economy, and either product obsolescence or a loss of competitive advantage vs. other players in the same industry. In the author's opinion, Sprint qualified for the last component of the trifecta by virtue of its brand degradation and relative inability to attract and hold consumer wireless subscribers compared to AT&T and Verizon Wireless.

The client, however, noted that the financial tools to which his company has access show an improvement in Sprint's financial standing through the second quarter. Although he didn't put it this way, that was basically a reference to Sprint's increase in free cash flow compared to the first half of 2008. So how on earth could this author say Sprint is going bankrupt?

Well, I'm trained as a journalist, so the first thing I noticed was a classic phenomenon: the headline didn't match the story. The article didn't actually say all ten companies were going bankrupt. Rather, you had to consider the medium and the message to get an accurate takeaway.

In a bull market, people sell financial information primarily by promoting hot stocks that people can buy. In a bear market (which we're still in despite this year's intermediate rally), people sell financial information primarily by trashing struggling stocks that people can short. Of course it should be the other way around -- buy low, sell high, right? But you can't change human nature.

So this article was a clear appeal to prospective short-sellers to give them ideas on stocks to go after. It could have been more accurately called "Ten Big Companies That It's Plausible to Foresee a Bankruptcy Scenario, Any One of Which Could Prove Us Right." But that would obscure the fact that the article isn't taking responsibility for the resulting actions of its target market -- bearish stock market players -- if they choose the wrong stock from the list to attempt to run down.

In that context, for business users, the article makes some decent points about Sprint (which does have heavy debt and still too much churn in its subscribers), but in the sense of planning for change, not pushing the panic button. A much more complete picture emerges from combining positive and negative trends and understanding the impact on the enterprise user market specifically.

Sprint does have substantially improved free cash flow from extremely depressed levels in the corresponding periods last year. But this improvement is largely a result of ongoing operational cost cuts and severe cuts in capital expenditures. Sprint's capex declined 69% in the first half of 2009, from $2.006 billion last year to $612 million this year.

This financial measure does protect Sprint's liquidity, but does not represent an improvement in Sprint's business outlook. Its operating margin on wireless is only about 22%, roughly half of Verizon's 46% and AT&T's 40%. On an accounting basis, Sprint is still posting net losses. It has about $4.6 billion in cash reserves, but also approximately $20 billion in debt. And it's a matter of perspective whether it is appropriate to cite the cash reserves as "money in the bank" or simply a subtraction from the gross debt pile to reach a net debt calculation.

Our perspective is that carriers do not easily maintain their market presence once they start slashing capital expenditures -- except for resellers, telecom is simply a capital-intensive business. And Sprint is struggling in its basic business, particularly in the face of the move to smartphones where AT&T has the iPhone and Verizon promotes BlackBerry, while Sprint is promoting the Palm Pre.

Meanwhile, Sprint's current credit rating is BB. That's low but not nearly indicative of near-term bankruptcy, especially when you recognize the value (as we do but the stock market essentially does not) of Sprint's wireline enterprise base. However, we also believe that the value of this base is at risk of degrading, particularly if an experienced and diverse telecommunications player (such as Deutsche Telekom) does not step up soon to purchase some or all of the company.

The bottom line is that Sprint is not exactly on the brink, but that it's wise to recognize that the company is facing significant challenges, including financially, and is likely to undergo some sort of significant ownership or structural change, and you do want to be able to explain that change when it comes. That's part of the very purpose of this blog, and in fact, I wouldn't mind if you send a note titled READ THIS! to your key management colleagues with a link to this post and our other notes about Sprint, which you can find by putting "Sprint" in the blog search tool.

An increasing number of enterprises are now opting for truly comprehensive telecommunications procurement projects. A large part of the idea is to represent to suppliers that there are no stepchildren anymore among corporate networking services. Big companies want great deals on everything: corporate WAN services like MPLS, traditional toll and toll-free voice, LAN/WAN managed services, and expanding footprints of cell phones, smartphones and aircards. Today's diversity of user behavior probably makes all of these areas financially material to your company, and today's economy doesn't allow for bleeding, non-market costs in any of these areas.

The trick is to get suppliers to respond to the extra incentive of a big bucket of diverse business that you've put out simultaneously to the market, without sneakily creating linkage that actually subtracts from the flexibility of the ultimate deals.

Most people know that even in a full competitive refresh, it's advisable to use separate or modular RFPs for key parts of the project -- such as wireline, wireless, and complex managed services. But carriers know how to subtly pull these separate items back together in a way that may not be optimum for the deal you want in any of them.

They propose dollar commitments to count up all of the spend, or time commitments to put all of the services under the thumb of one carrier for the same relatively long period, or credits that are structured to be meaningful only using the total bucket of services. All these moves can render the entire package of services more onerous or restrictive than they would have been separately.

Consider corporate wireless contracts. Even outside a multi-service procurement project, wireless contracts typically cut across two dimensions. One is the length of wireless carrier's contract with the corporation -- say, two years. The other is the length of each subscriber's line term -- often a choice of one or two years.

It would be great for a corporate-liable user to have no "contract" on the logic that he or she is simply part of a large corporate contract, and there's nothing wrong with asking for that. But carriers generally argue that sunk device costs make it logical for them to have terms attached to individual lines with incentives for a longer term. You can and should negotiate for a pool of waivers of the resulting early termination fees up to some percentage of the total footprint, but both an overall contract term and individual line terms are still the norm.

This leads many telecom managers to try to keep things coterminous in anticipation of their next negotiation. After all, the company that puts out "on the street" a full competitive refresh across many services has often labored mightily to line up its existing wireline, managed services and wireless deals. But watch what happens: some bidders may propose a longer corporate term for all of the RFPs that make up a competitive refresh.

In the carrier's mind, the single resulting mega-commitment (if it's really a single commitment, which is another question) may simply be a sum of the anticipated commitments for each of the included services. And the commitment may have to be longer than such component parts as individual circuit terms or wireless subscriber line terms, potentially complicating future attempts at coterminality, especially if user behavior shifts to newer devices or technologies.

In the text of RFP responses, their logic is often expressed as a compliment to the customer: "It's great that you want to competitively bid out everything -- believe it or not, we think that's swell! So how about we put everything under a single converged three-year contract? We'll give you our best offer that way -- promise!"

But your goal should be that the combined commitment enables one type of service to retire the obligation to other services faster than any of them would on their own, especially if you can swing a term commitment rather than annual commitments. Just adding up the separate commitments into a new, single number, and putting everything into a single, longer-term deal doesn't accomplish that. Will the prices be better? They could be -- especially since we're seeing some of the best transport pricing in large managed services procurements -- but that's not a given just because of the fact of rolling wireline and wireless deals together. Prices still have to be compared to the market regardless.

I particularly love the word "converged" when it sneaks into carrier proposals in this context. If a carrier sells you both hundreds of managed routers for a new MPLS network and thousands of mobile phones under the same three-year term, what's "converged" about that? Nothing from a network standpoint, which is what the word "converged" should mean (e.g., sending landline voice over public or private IP). But it sounds good, doesn't it?

Bottom line: as with real convergence, it's the cost and quality details that count. A comprehensive multi-RFP procurement project may or may not result in a single contract. If it does, that contract should be at least as flexible as multiple contracts would have been.

As I write this, it takes $1.43 to buy 1 Euro, or put another way, the dollar is worth 0.69 euros. So tell me: Will the value of the dollar strengthen later this year, or weaken further?

That's okay, I don't know either.

But here's what I do know: If you have any global business, somebody in your company does care what the answer is. Or, more precisely, somebody cares whether the answer is going to have a material impact on your company's results, particularly if your stock is publicly traded.

Like the value of everything else -- stocks, bonds, real estate, oil, you name it -- the value of currencies has swung wildly and is likely to continue doing so. And if this prospect creates a material risk of variable results, then it's something that your financial shop has to make known in its disclosures.

That's why you, as a telecom professional, have to be keenly aware of the way your suppliers view this issue. I'm not talking so much about who's going to "profit" in terms of speculation about currencies going up or down. I'm talking about who's going to take the risk in the first place. Depending on how international carrier services are structured, the carrier could be taking the risk of currency fluctuation (and thus, in theory, the potential reward). Or it could be pushing the risk off on you.

Example: If you're a U.S.-based multinational corporation, and you negotiate a cost in U.S. dollars for international rate elements (such as ports and class-of-service packages for MPLS services), then you have a predictable dollar cost for the monthly recurring charge (MRC) of that element for the life of the contract. In theory, if the dollar strengthens and you could have paid the same rate element in a cheaper local currency, you could have "made money." But you don't know whether that's what your company wants. They may not want the risk of such variability, either as a matter of corporate philosophy or because of disclosure issues.

Now here's the kicker: The actual service you buy may not give you this choice, at least not easily. MPLS and its evolving platforms over the past few years, especially at AT&T, provide a great example of this.

You could pair up competing MPLS services from AT&T and Verizon Business in a competitive procurement and find that the default billers for the two are in conflict -- one wants to bill everything back to the U.S. in USD, and one wants to bill most of the foreign rate elements locally in local currency. Even odder, two MPLS service platforms at the same carrier may approach this issue from two completely opposite default billing assumptions -- you know, due to "product house" issues, as we've seen forever in the telecom industry.

Wrestling with this issue so that two competing offers you receive carry the same characteristic -- USD billing throughout or local billing in local currency wherever possible -- is a technical matter that may be subject to negotiation. But the far more important factor is what happens at the front end in your procurement planning. In our experience, currency issues are a critical, almost emotional, factor in the surrounding "baggage" that enterprises bring to the procurement process. When senior management finds that a supplier who's been down-selected cannot comply with the currency-risk requirements that they believed would be taken care of in a purchasing process, it can be one of those "oh boy" last-minute issues that scuttles a good deal, wastes all your invested time, and gives your shop a reputation for inability to move away from incumbent carriers and services. In short, a real leverage-killer.

It doesn't have to be this way. If currency matters are crucial, they should be described qualitatively and teed up quantitatively from the beginning in your RFP or other procurement process. Then, even if account teams think their default billing systems aren't geared correctly, they're the ones motivated to take the risk to "work the issue" to win the deal. When it comes to all the items that you should review with senior management at the beginning of your procurement process, this one is just about at the top of the list, so make sure to put it there.

When I say "managed services," what do you think of? Managed services can be limited to extending the scope of the data network service to include the WAN access router, or they can include outsourcing the management of a company's entire network infrastructure, including data, telephony and related ancillary equipment.

Different managed service operating models suit different companies, and there's no single overarching best practice in this area. But one decision point is especially important to business users considering the various service-delivery options for managed services. That's the sourcing decision to combine a transport services procurement with managed services procurement.

A straightforward managed-router service is almost certain to be procured with transport services. But at the other end of the scale, some companies don't think of doing an RFP for voice and data transport along with a comprehensive network services management deal. Not considering this sourcing approach can be a mistake, because the traditional transport service providers have been responding very aggressively to opportunities that include a significant degree of managed services on their part.

In fact, large deals that include both transport services and managed network services are currently driving the leading edge of the market for transport pricing. Some of these large deals also feature some of the most improved terms and conditions, and the biggest cushions between the annual commitment and the expected transport spend. Think about the ways in which you may need this deal flexibility going forward. Just consider the possibilities of more wild economic swings, or carrier restructurings, or radical behavioral changes by end-users, all with possibly huge impacts on the size and mix of telecom spend in your company.

To get those benefits, you don't have to be shy about customizing your managed services requirements. It's typical for companies to retain core and unusual competencies in-house (such as custom network security management processes, network architecture and design, or vertical-industry-specific management tasks), while outsourcing more routine network management tasks including equipment monitoring, incident management, configuration management, reporting and the like.

Of course, finding the transport pricing gold mine isn't the only consideration in taking on a managed services procurement. Among the key factors that an enterprise should consider in their managed services decision-making:

-- Migration. Doing both transport and managed services together is a big undertaking, and you may have to calculate whether any time lag in booking your savings cancels out some of the advantage in hitting the transport pricing sweet spot. But do your own time and savings analysis! Tipping off carriers to this point is an invitation for them to make "RFP avoidance" offers that deliver a quick price-down but provide neither market-leading savings nor appropriate going-forward leverage.

-- HR issues. You'll need to assess the costs and complexity of displacement of internal staff by the outsourcer.

-- Provider capability and sourcing flexibility. For global deals, a large carrier may or may not have best price and service for both their core transport and managed service in each and every country or region. Some resulting deals require multiple awards and some don't, depending on the performance measurements and other mechanisms used.

-- Hidden cost traps. You obviously don't want the provider's profit from the managed services piece to outweigh the data and voice transport savings, so a close analysis of all available enterprise market experience and data is warranted. And watch for pitfalls -- in areas of the world where Value Added Tax is collected, if it's not reclaimable on the provision of a management service, it could be offsetting other cost gains. This should be modeled against a volume baseline in advance, just like any tax or surcharge.

With those precautions, "discovering" the leading-edge market in this way can be a very rewarding experience. As with any deal, an all-in Total Cost of Ownership model is the way to go. It's rigorous to achieve but key to a great result in the end.

The following is a guest post by Justin Castillo, a partner with our law firm affiliate, Levine, Blaszak, Block & Boothby, LLP.

Many economists are warning that the current downturn could last into 2011 or beyond. Until it ends, enterprise customers are facing a once-in-a-generation decline in their businesses, while carriers are trying to economize by cutting capital expenditures, reducing headcount, and driving harder bargains with their customers.

Over the next several years there is a very real possibility that your enterprise will face one or more severe challenges, including layoffs, plant/store closings, divestitures, and mergers/combinations (either voluntary or forced). These challenges will test the ability of telecom managers to manage their service providers. The lesson for anyone about to embark on a telecom procurement is to assume that your company will be under economic pressure for months, if not years, and negotiate accordingly. Pursuing the traditional strategy of relieving short-term financial pressures by securing an average, if not mediocre, deal that yields enough upfront credits to get you through this quarter is no longer an option.

We have all heard stories of the carrier account team from hell, but it is important to note that often the customer is equally to blame for a deal that is mediocre (or worse). Let's see how that happens and find ways to avoid it.

Short-term thinking. Reduced competition and a stagnant economy mean that much of the "low-hanging fruit" is gone: the virtually automatic 10% annual price decreases of the last decade are a memory, and users now have to wrestle for better pricing and for terms that will protect them from the risks of a protracted downturn.

Some companies will keep trying to score easy wins. They may reap modest price breaks and/or credits by agreeing to diminish their leverage, but they are setting themselves up for disaster in the coming years because once their leverage is gone, they become captive customers of their primary carrier, unable to pursue competitive options.

Failing to look beyond price. Looking beyond price went out of fashion early this decade. During the past five years, for example, large customers often believed that they did not have to worry about business downturn clauses because the economy was strong and overall demand was rising. As the recession batters budgets and reduces demand, some customers are confronting the very real possibility of a shortfall, which gives new relevance to business divestiture, early termination, and shortfall provisions. Customers who agreed to the carriers' boilerplate in this area (among others) are in for a shock as they discover that those clauses offer little in the way of real protection because they don't entitle the customer to anything more than a conversation.

In the current economic climate controlling risk has taken on new importance, and terms and conditions matter more than ever.

Losing control of the procurement process. Procurements work best when the customer is in control of the negotiations. Controlling a network services procurement means having leverage -- the ability to go somewhere else if you aren't offered a good deal -- and having the time to take advantage of those options. All too often customers lose control of procurements because they run out of time, usually because they either didn't allow enough time in the first place, or chewed up months on internal negotiations before going to the market. That puts the vendor in the drivers' seat -- the conversation starts to focus on how much in savings the customer is losing every week by not agreeing to the vendor's latest offer.

The only thing dumber than not allowing enough time to complete negotiations is telling the selected carrier up front that the deal has to be done by a certain date, which pretty much guarantees vendor non-responsiveness as the clock winds down.

Creating a credibility gap. Enterprises that want the best deal need to maintain credibility with their vendors. That requires discipline, internal coordination, and knowing your traffic. It also means maintaining a clear message internally and reminding the vendors that you know what you're doing.

Vendors are always looking for higher-level executives who will weigh in even when they know little. If they find a CIO who blusters and does not know what he or she is talking about (the kind who wants "Most Favored Nation" clauses from all of the telecom vendors), they'll pounce -- and you'll end up trading $1 million in savings over three years for $100,000 in unattainable credits and a trip to Pebble Beach.

Confusing cost and value when compensating advisors. All too often customers try to save money on procurements by agreeing to an uncapped contingency fee with outside advisors. Such arrangements nearly always overpay outside experts, especially when (as is often the case) the terms of the fee agreement are not clear. Will the contingency fee be based on total savings? Over what time period? Do you have to pay if the advisor's projected savings involve migrating to a carrier that you don't want to use? In addition, these arrangements can incent advisors to structure deals that maximize fees by surrendering the customer's long-term leverage for short-term savings.

If you want to do a contingency fee deal (usually because the project won't be approved if there is any out-of-pocket expense), at least take steps to protect yourself. Cap the fee at a reasonable level, reduce the contingency fee after it reaches a predetermined figure, and count only one year of savings when computing the fee.

Failing to recognize the primacy of leverage. The biggest mistake that enterprises make is failing to maintain leverage. Many companies think that negotiating requires giving up leverage: improving pricing, terms and conditions requires, say, increasing the commitment from 65% of total spend to 80%. Over the long term, this approach is self-defeating because as leverage declines you get less and less from the vendors.

Leverage matters because buying telecom services is not like buying many other kinds of services: they are mission-critical, purchased for multi-year terms, and it is difficult and expensive to switch vendors. The only way to keep your primary vendor honest is to be able to credibly threaten to move traffic if you are not treated appropriately. Customers who squander their leverage become beholden to their primary carrier -- guaranteeing above-market rates (and often sub-par service).

The key is to use leverage without eroding it, primarily by pitting the primary vendor against one or more competing carriers. Keeping the customer's traffic "up for grabs" yields steady pricing improvements over the contract term.

While we are on the subject, maximizing leverage by pursuing "no commitment" deals sounds great, but in practice, decent pricing in telecom requires a commitment of one kind of another. Those who think they got something by avoiding a minimum annual or term commitment often find that they have minimum commitments for each and every circuit -- which is much more onerous. Negotiating network services agreements is never easy, but the need to control risk and improve deal economics makes that task even harder. In short, there is no room for error. Enterprises that avoid the mistakes described stand a much better chance of conserving their leverage and getting the deal they need to meet the challenges of the coming years.