Link Pricing To Business Drivers To Take Services Partnerships To The Next Level
Clients and services partners have talked for years about linking services partner pricing to business goals. However, traditional pricing models such as time and materials and fixed fee still dominate in services partnerships; examples of truly innovative pricing models are rare. Despite the rarity of these outcome-oriented pricing models, interest remains high. Clients frequently ask Forrester for examples of next-generation, innovative services pricing models. So, I’m writing this post to highlight two recent examples (showcased at March customer and analyst events) that truly push the envelope for services pricing models linked to business goals.
Example 1: Venture-based
At BearingPoint’s recent analyst summit, the EMEA-centric business consulting provider showcased multiple examples of venture-based engagement. The examples showcased go beyond the typical “VC fund” that we see at other services providers (in which an arm of the services vendor operates like a venture capitalist by doling out funds to a set of early-stage companies). Instead, BearingPoint gives consulting time and tools to select clients or alliance partners in return for equity. For example, Bearingpoint has a services-for-equity partnership with tracekey, an early-stage company focused on track and trace functionality for pharmaceutical companies. This means that Bearingpoint’s financial rewards are directly tied to tracekey’s results, without getting tangled up in managing to the contract terms or project dashboards.
Example 2: Consumption-based
British-Australian Mining Company Rio Tinto is struggling to keep pace with business demands in an environment of declining and uncertain revenues due to volatile commodity materials prices that have sunk dramatically in recent years. Despite the massive cost-reduction pressures it faces, its business leaders still demand fast turnaround on technology requests and a modern “evergreen” SAP core. To achieve this dual mandate of speed and cost control, Rio Tinto inked a unique deal with Accenture that is not only outcome-oriented (based on technology outcomes and service levels) but also consumption-based. This deal allows the mining giant to adjust its services consumption based on the business environment. For example, if times get tight, Rio Tinto can reduce support levels to instantly lower costs.
Have any other examples to share with us? We’d love to hear from you.