Pricing Model for Infosys BPO limited. Analysts estimate that while less than 5% of offshore contracts are currently outcome based, this trend will pick up in 2013. A!!"#$ estimates that 10% of total reenue is comin& from outcome-based contracts'pricin& for the (ndian #utsourcin& (ndustry. asscom beliees that the industry is be&innin& to moe beyond time-and-materials pricin&. About )0% of the industry*s total transaction alue now comes from fi+ed price deals irrespectie of the number of man hours spent. espite the outcome based model in prominence since last four years, the olume did not pick up in (ndia. /his model is best suited for e+istin& clients and for new clients who hae a clear understandin& of the model and in this models both endors and clients should ensure that the scope of the en&a&ement and the outcomes are clearly defined.
/he success of this model lies in the understandin& of the customers business model, operations and industry nuances and how to mana&e risk inoled at all sta&es. isk is hi&h for the endors and they char&e premium and since they cannot wait for payments till the business outcomes, only apportion of the reenues are bein& done on the outcome-based pricin&. usiness outcomes are time consumin&. /he clients and endors should hae a common basis for future alue creation and endors should be clear as to how much risk he can bear and how well he knows his own processes and business. #ther e+ternal ariables also hae to be taken into account and for the model to succeed both the client and endor should hae a stron& and open relationship between them so that they can achiee the planned common outcome. "ustomers prefer such billin& models because they can keep their costs entirely ariable and dependant on their own reenue &rowth. Althou&h outcome based contract meant hi&h inolement between clients and endors for efficient deliery of work. $any incenties could be obtained from price based contract .(t also helped in cuttin& the costs as productiity and efficiency could be achieed throu&h less number of workers. oweer it cannot be used due to followin& reasons4
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irstly (nfosys cannot rely on outcome based contract with eery client the
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reason bein& simple, sometimes a pro6ect may re7uire lon& term till it can be ealuated and its outcome alidated. "lients and endors hae to inest more in understandin& each others business
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in order to determine the proper leel of serice. /his is only possible if they know each other well by terms of re7uisite and e+pected leel of serice. 8aluation of serice was directly related to the payment. Any hiccup in work would directly result in losses. Also, it isnt easy to determine whether the resources to be utilised will yield a &ood #(.
(nfosys should lay its concentration on transaction based contract een thou&h /8s based model has been impressie when the forecast is accurate. /ransaction based contract would result in char&in& for the e+act number of processes bein& handled simultaneously. (n transaction based pricin&, what and how many resources are inoled and how much time is taken to 9rocess the transaction while also meetin& 7uality and serice leel a&reement !:A re7uirements, are the ;ariables that are typically mana&ed by serice proider. /his essentially means that ariability and risk Associated with customers business actiity is transferred to serice proider. !erice proider mana&es this isk by utili
. or e+ample, for payroll processin&, the transaction price may be 7uoted as =+ dollars per payslip>? or for inoice processin&, the transaction price may be 7uoted as =y dollars per inoice>. oweer, since business actiity does not remain at a constant leel throu&hout, there needs to be a mechanism which can determine how the transaction price aries for different leels of business actiity. /o address this, transaction price is &enerally mentioned as applicable for a specified transaction olume ran&e. !uch a olume ran&e is known as @dead band which is typically deried by analy
risk owned etter control of serice deliery as people ramp up'down and re-
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allocation becomes easy #ffer commercial differentiation hi&her sain&s due to standardi
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and innoations that result in hi&her output for lesser input $ore fle+ible and scalable pricin& model as payment is for consumption
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only 8ffectie monitorin& of costs due to enhanced isibility into
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consumption pattern :ower per unit cost due to improed efficiency
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$akes it easy to compare and select serice proiders by comparin& their per transaction price alon& with !:As
or smooth processin& of transaction based billin&4 •
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"hoose the ri&ht transaction unit for pricin& the deal B one that ali&ns both parties interests. or e+ample, in case of insurance, if the transaction unit is @no. of policies issued, then the interest of serice proider and customer are ali&ned - more the number of policies issued, more is the payment to serice proider and more is the premium collected by the customer. As a&ainst this, if the transaction unit is @no. of leads, then the interest of the customer and serice proider are not necessarily ali&ned as more number of leads would definitely translate into more payment for serice proider but may not translate into more policies issued and thereby, premium, for customer. 8stablish a mutually a&reeable mechanism to address olume fluctuations. A few such mechanisms could be4
efine an A"'" framework to handle olume ariations beyond the base olume Ad6ust the baseline olume periodically usin& aera&e olume e+perienced in the past few months thus allowin& both parties to share the risk of olume uncertainty and allowin& serice proider sufficient lead time to absorb olume fluctuations •
A&ree for less strin&ent serice leels for serice proider if actual olumes
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materially e+ceed those forecasted A&ree on definin& and measurin& !:As durin& the initial phases of the
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en&a&ement and use this data for base linin& them for the remainin& term of the en&a&ement 9lan for a comprehensie chan&e mana&ement effort which includes top
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mana&ement support, syndication of key stakeholders and end-user education pro&rams. 8+ercise hi&h leel of transparency in sharin& data and details between the parties to deelop an enironment of trust.
