The evolution of IT Services pricing

Outcome based pricing seems to be the latest buzzword in the in the IT services space. Being radically different from what has been the industry norm in pricing models so far, it involves a lot of risk for the vendor. At the time when I write this, I don't see many vendors in the Indian IT services space that would partake in such pricing models. But for a few pioneers, I doubt whether the top players (in terms of market share) would consider it. They may fall in when it comes to a matter of survival, but not yet.

While companies still talk about output based pricing which is akin to transaction pricing where customers have to pay per transaction, outcome based pricing is an evolution where the customer would be charged only for successful transactions.

So, what is the difference between output and outcome based pricing?

Instead of having to pay for every transaction being processed, the customer would pay for every successful transaction processed. If we consider the example of a credit card company as the customer, they would have to pay not for any credit card application processed, but for every credit card issued!

IT services vendors that can offer a robust technology platform and efficient operations combined with a strong requirements management framework can capitalise on their strengths and offer such innovative pricing models that appear to be the next wave in IT services offering.

It is undeniable that efficiency plays a key role here. The value add that comes along is the agility and quick adaptability to changes in the business environment when technology and operations are integrated. Factors that affect the technology platform necessitate changes in operations & training and must be handled seamlessly so that the end customer does not suffer.

Reference: http://www.igate.com/iblog/?p=55