Trends Report

Service Pricing Models Are The Key To Outsourcing Flexibility

October 4th, 2011
Wolfgang Benkel, null
Wolfgang Benkel
With contributors:
Christopher Andrews , Bill Martorelli , Sean-Paul Mauro

Summary

With the right pricing models, sourcing and vendor management (SVM) professionals can build the foundation for flexibility in infrastructure outsourcing contracts. Flexibility has different flavors, such as the ability to change the service scope based on business needs, react to fluctuating baselines, and initiate value-added projects and new services fast. But flexibility is only one side of the coin because the most flexible pricing models have very low predictability, don't support economies of scale, and put the full risk on the client side. The challenge for SVM professionals is to identify the right pricing models that are flexible yet can still support predictability and efficiency and share key risks with providers. Every type of service has a best-practice pricing model that supports the corresponding requirements, starting with consumption-based pricing for managed and cloud-based services and outcome-based pricing for value-added consulting services up to special models for innovation and new services.

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