The IT Outsourcing Price Equation

Outsourcing Journal on May 01, 2006

Pricing is one of the most important aspects of outsourcing projects, yet it doesn’t seem to get the full attention it deserves in the outsourcing process. This article breaks the pricing structure down into three parts: how much, how long and what elements need to be priced. The “how much” portion of the equation is based on what the buyer wants to accomplish, and tends to focus too much on getting more for less. While low prices are obviously desirable, sometimes achieving performance or quality improvement or reduction of future costs can be even more appealing than a price decrease, this article points out. As well, companies need to be detail-oriented when settling on a pricing plan. This includes making sure that there is enough granularity so that the pricing plan can be adjusted when or if necessary without causing problems. This article also suggests that companies do a risk assessment, because risk and pricing go hand-in-hand.