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Using Hybrid Pricing Models for IT Outsourcing

by: Sarah Joson

Wednesday, March 13, 2013 | Outsourcing News |

Standard and structured pricing models for outsourcing IT services are no longer  used these days. Back then, two types were mostly used - pricing based on input, which is mostly used for product development services and application maintenance, and output-based pricing for infrastructure services.

Information technology (IT) outsourcing has diversified over the years, especially with the emergence of cloud technology. Clients now prefer hybrid pricing models that cover various processes and products that they would like to outsource, instead of purchasing an entire IT-suite that restricts their preferences.

IT outsourcing checklist

A CIO.com article shares a checklist that should be reviewed by IT services clients who are interested in the hybrid pricing model.

1) The pricing model should be based on the requirements of the customer. Service providers often stick with a fixed model or only offer limited types of services. However, clients can dictate their requirements. For instance, their application development and maintenance (ADM) services can be contracted with IT providers that are flexible enough to offer the managed services model and pricing based on additional retail processes.   

2) Will your company benefit from the changes? Business owners tend to overlook key factors for outsourcing. They should make sure that once outsourcing changes are implemented, there would be evidence of improvement. A good example is changing IT helpdesk calls to a different platform such as email response, which some clients find too simple as they are looking for real-time assistance.

3) Raise your concerns and identify what you want right from the beginning.
Having a good start on things could not only make operations smoother but faster as well. It will also help during the pricing period as clients will only pay for the services that they identified and they could strike a better deal since providers will get a better idea of the entire operation.

4) Consider integration problems. Clients and IT providers have different perspectives on how things are done.  Moreover, some clients do not fully understand the actual value of the processes that they are acquiring. Both factors can result to additional overhead costs.

5) Gainsharing is a two-way street. Both parties should anticipate that things can turn sour, and when that happens, they should work together to overcome or address the problem.  It will be a long and painstaking process but if the client and provider work together, with the right governance and leadership, it could be a success.

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