Scope preparation for outcome based pricing – Phaneesh Murthy
SOURCE: iGate Blog
DATE: April 16th, 2010
Good article by Phaneesh Murthy, CEO iGate on outcome based pricing, criticality of defining the scope for such deals, building vendor competency in pricing such deals and how simple things like forms of input have a huge impact on costing of such deals. I believe in addition to the vendors, the firms which are outsourcing need to build the competency in their internal metrics measurement to leverage outcome based pricing both in terms of scoping it and ongoing management which as the article points out can get fairly complex. We find that a transaction based pricing model is on the wish list ( and contracts) for a number of companies offshoring but very few really have enough inhouse processes so clearly defined that they can leverage it right off with an offshoring vendor so the path of least resistance is to go the FTE pricing route. (Pricing Offshoring deals – Transaction based vs FTE based)
A number of contracts we have seen signed today have outcome based pricing as a future state model with firms including gainsharing but start with FTE based/input based pricing. As companies get more mature in their understanding of what they want to outsource, build inhouse capabilities to manage and monitor outcome based pricing & vendors build the domain capabilities to take on outcome based pricing models it could be a win win situation for both the parties.
Scoping a Business Outcomes driven project
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