Adopting a Viable Pricing Model to Maximize RoI
Return on Investment (RoI) is a necessary consideration for a client when he engages with an outsourcing facility. While it involves the balancing out of the Investment made against the Return that is accrued out of it, factors such as the upfront costs encountered by the service provider as well as the client, the cost-savings that shall come about to both parties, as well as any revenue benefits that may be experienced to the client as well as vendor need to be accounted for.
Furthering the maxima on Return on Investment, choosing a viable pricing model from amongst Full Time Equivalent (FTE) and Fixed Price is necessary. While the FTE calls for a Dedicated team, infuses flexible capacity vis-à-vis stretch capacity and client benefits in terms of escalation in work product quality, efficiency and lowering of turnaround time, a Fixed Price model calls for other features.
In a fixed price model, while the client exactly knows what they are getting for a set price, regardless of the engagement evolution, the client incurs no cost, as the vendor's learning curve progresses. Further, the risk on the investment made and returns thereby shifts from the client to the vendor, while the benefit arising from the expertise acquired, efficiency raised as well as the benefits of an established process directly accrue to him. In this regard, the benefits acquired are a quid-pro- quo for the upfront risk entailed by the vendor.
In this respect, the client and vendor need to work closely towards developing and adopting a pricing model that addresses both their concerns. A closer need to look at these models individually is called for, which could perhaps be the basis of analysis and discussion in the near times to come.
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