4 New IT Outsourcing Pricing Models Gain Popularity

Partner Steve Martin serves as an industry resource in this piece about the implications of using a variety of pricing models to elicit more value from IT service providers and produce higher margins for the vendors themselves. Sample excerpts: “'The better contracts aspire to satisfy the customer across prioritized business objectives that were either unable to be converted to traditional service level agreements or reduced to a performance specification,' says Steve Martin, partner with outsourcing consultancy Pace Harmon…Gain-sharing requires a high level of trust, an equitable distribution of risk and reward, and significant upfront investment, says Martin of Pace Harmon. ‘In practice, very often neither the vendor nor customer is willing to fund the investment without a guarantee of a payback.’…[Regarding incentive-based pricing], ‘the key is to ensure that the delivered outcome creates incremental business value for the customer,’ Pace Harmon's Martin says.”