While the current percentage of outcome based pricing models is small – the model is well-suited for engagements where the majority of work is transactional in nature, the client wants pricing clarity and guarantees, and the service provider has no explicit motivation to improve performance beyond service levels.
In fact, we believe that the transition to these as-a-service models is both critical and inevitable for enterprises with engagements matching these criteria, which exceed 15% of our database. Why?
At the same time, outcome based pricing models pose different types of challenges than other types of contracting options, and enterprises must be prepared to address them to achieve success. For example:
Most enterprises going down the outcome based pricing model path will be best served by phasing in the adoption. Doing so will help enterprises reduce risks and enable them to appropriately update their systems to create and put in place sufficient governance mechanisms for the new contracting regime.