Pricing Research

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Pricing Research and Pricing Metrics

As the leader in  pricing research and pricing metrics, we give you a deeper level of expertise and data, ensuring that the price you pay matches the value you need without overpaying, or under-scoping.

From price benchmarks and strategic reviews of your engagement to the impacts of next-generation delivery models on pricing and proposal and contract insights, we can help you with all your pricing challenges.

Our pricing research offerings include pricing analytics as a service, custom price and performance benchmarking, price benchmarking catalogs, strategic engagement review, service provider pursuit support, and more.

Pricing Research: Key Factors Impacting Outsourcing Costs

As outsourcing activity picks up after slowing during the beginning of pandemic, now is an excellent time to gain a better understanding of pricing and how providers price IT and BPO services. To help ensure your company gets the right value out of your current or next outsourcing deal, read on for pricing research and outsourcing costs expertise based on Everest Group’s insights.

Seven common trends that can impact outsourcing costs:

  1. The economy: Without a doubt, the economy plays a major role in the movement of deal pricing. The pandemic forced many enterprises to ask for short- to mid-term invoice discounts, while others used it as an opportunity to renegotiate their existing contracts. As demand has bounced back, there are supply shortages that have resulted in upward movement for talent across skill types.
  2. RFP vs sole-sourced deals: First, there is nothing wrong with a sole-sourced deal. It can be more efficient, shorter in duration, and deliver greater value compared to an RFP-led scenario, given you have a trusted relationship with a vendor of choice. However, by introducing competitive tension into the overall bidding process, an RFP can often be more effective in getting the best pricing. But, as a result of excessive price undercutting, the quality during delivery may not be what was promised during initial negotiations
  3. Cross subsidization of accounts: Often, providers subsidize their loss-making accounts through their profit-making ones. This is why it’s so important for enterprises to benchmark regularly to see how prices compare against market peers and the overall industry
  4. Enterprise and sector financial performance: The performance of the industry or the sector as a whole can widely influence deal pricing. Sectors such as insurance or oil and gas that typically do not have very high margins usually have visibly low time and materials (T&M) costs or managed services pricing compared to enterprises in well-performing verticals such as life sciences, retail, investment management, or capital markets. While paying less in low or underperforming sectors is not guaranteed, clear trends point to this practice
  5. Buyer persona: The sourcing team can impact the negotiations in ways enterprises often can’t fathom. For example, a senior purchasing manager who has worked across a range of sectors and lived through the last two recessions will bring a different experience into negotiations than those who are newer in their careers and have worked in the cash-rich internet, high-tech, or e-commerce sectors, which can impact the price and length of the deal-making
  6. Transformation vs technical upgrade: If embarking on a complex transformation engagement that involves multiple elements such as change management, business consulting, architecture design, and a longer advisory/blueprinting cycle, it is highly likely you will engage a Tier 1 systems integrator or consulting heritage vendor (including the Big 4 firms) for the entire scope of work. Expect such engagements to cost as much as two and a half times more than a technical upgrade of a similar effort
  7. Contract terms and conditions: Service levels, service credits, and penalties can have a major impact on pricing without enterprise procurement realizing it. In our experience, most holdbacks or fees at risk the enterprise asks the vendor to commit to are baked into the deal as contingencies. So, if you are planning to have the most stringent service levels and fees at risk for your next deal, think twice about whether you need it

Our Pricing and Contracting Offerings

Pricing Analytics as a Service

Enterprises need to understand the right amount they should pay for outsourced services, as both under and over-paying can lead to value dilution. Pricing Analytics as a Service is an annual membership providing access to custom price benchmarks, performance metrics, and ongoing access to our pricing and contracting experts who are available to support you throughout the year.

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Software license and cloud platform diagnostics

Enterprises typically spend 0.5-2% of their revenue on software products and cloud platforms. Improving their contracts and pricing on these categories can yield significant savings on their overall budget. We support enterprises with due diligence, license model assessment, contract optimization and price benchmarking across a wide range of software and cloud platforms.

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Strategic engagement review

Strategic engagement review (SER) is a proprietary framework created by Everest Group as a result of reviewing and benchmarking hundreds of outsourcing contracts over the years. An SER usually covers an extensive review of the deal solution, commercials, performance metrics, contract terms and conditions, transformation roadmap, and other key tenets helping enterprises determine the future roadmap for their strategic outsourcing relationships.

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Price benchmarking catalog

The catalog is an off-the-shelf roster of the most common contemporary roles and resource unit price benchmarks It covers benchmarks for all major IT and BPO functions across key onshore, nearshore, and offshore locations. The benchmark catalog is refreshed bi-annually and coupled with on-call expert time to respond to queries or offer guidance.

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Solution sizing insights

Solution misalignment has been cited as one of the key reasons for service provider eviction during RFXs or a major cause of client friction in sole sourced scenarios. We support pursuit or delivery teams on understanding detailed effort estimates and delivery guidelines to do appropriate right-sizing across different type of engagements. This enables service providers to structure appropriate solutions at competitive fees.

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Custom price and performance benchmarking

We assist clients in custom price and performance benchmarking for services across multiple pricing models, operational metrics, and contract terms. And we do this across IT infrastructure, applications development & maintenance, contact center, transactional processes, judgment-based processes, specialized skills and professional services.

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Service provider pursuit support

Pricing intelligence is critical to sustainably winning and retaining business for service providers. We support pursuit teams on a live bid in order to engineer a competitive fee per the specific scope and baselines of a deal. This enables service providers to clearly articulate their value and create a win-win relationship with their clients.

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Pricing Research: Coverage Across Pricing Models

Input-based Pricing

The fee is linked to the time or effort delivered by the resource. It is a simple and easy to implement this model, and ideal for situations where delivery risks cannot be quantified, or scope of services is relatively unclear. Example: Rate per hour for a developer resource.

Our coverage includes all key IT, BPO, and Professional services roles for delivery locations across the globe.

Output-based Pricing

Fee is inked to the output of a certain service or process. It provides assurance around paying for deliverables, not time. There is though a high contingency on volumes, scale, and complexity; therefore, is relatively difficult to implement and track. Example: Price per invoice processed.

Our deep normalization approach ensures a like for like comparison incorporating service, skills, and contract-related factors.

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Outcome-based Pricing

Fee is linked to an actual business outcome. It is high risk, hard to implement, but there is immense business impact if done right. Applicable only where business impact metrics can be directly linked and quantified. Example: Fee for strategic outsourcing and category management which is linked to the committed savings achieved.

Our approach for pricing insights for this model includes contextualization to the environment and use of truly relevant comparison sets.

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