Outsourcing Contracts
Enterprise buyers frequently misunderstand voice network services and incorrectly group disparate services under a single resource unit (RU). Accurately defining and pricing RUs is essential to ensure both the enterprise and service provider benefit. To shed light on this often-cloudy aspect of enterprise networking, read on.
Voice technologies like Private Branch Exchange (PBX) and Voice over Internet Protocol (VoIP) have been integral to enterprise operations for many years now. Network voice managed services can make up a sizable portion of an enterprise’s IT infrastructure outsourcing expenditure – consisting of up to 10% of the overall network managed services spend and as high as 5% of the overall IT infrastructure outsourcing spend.
Historically, outsourcing voice managed services has been trickier than network services. From our observations, enterprise buyers typically are unaware of the depth and nuances involved with voice services. Let’s explore this further in this blog.
While traditional network RUs like switches, routers, etc., are well understood and standardized, blind spots exist across the industry over defining RUs and pricing voice managed services. Enterprises often lack a comprehensive understanding of all the RUs involved in voice managed services and group disparate services under a single resource unit, such as voice endpoints.
This broad classification can create the following two types of challenges:
An internal enterprise telephony service can have a significantly different price point and RU compared to an external-facing contact center. Service providers also have distinct price points for on-premises versus cloud-based versions of the same services.
For instance, prices for an on-premises CUCM-based VOIP system can vary widely from a Cloud Cisco Webex-based system. Similarly, an on-premises contact center will attract a completely different price point than one that is cloud-based.
Elements like voice gateways and session border controllers that require additional management effort and pricing can further amplify the complexity of voice networks. This creates a scenario in which the chances of applying an inappropriate RU rate are very high.
Fig. 1. Cloud-based instance of the same technology can be priced differently compared to the on-premise instance
This may cause issues during the actual delivery and lead to unanticipated renegotiation between the parties.
Appropriate RU definition and pricing is important because it ensures mutual value is created between the enterprise and service provider and neither comes away from the engagement feeling shortchanged.
Below are some common RUs and the associated pricing metrics that should be leveraged when outsourcing voice managed services:
Resource Unit |
Pricing Metric |
PBX System (Legacy) | Per device |
VOIP (such as CUCM-based systems) | Per endpoint |
VOIP – Cloud-based phone systems | Per endpoint |
Cloud contact center | Per agent |
Session Border Controller | Per device |
Voice Gateway | Per gateway |
Video Conference System | Per device |
Video Conference System with Telepresence | Per device |
Table 1. Commonly used voice network resource units
Enterprise buyers or service providers of voice managed services who want to better understand the pricing model and price benchmarks across geographies, please email [email protected].
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The slowdown in demand in 2023 had a significant impact on services pricing trends. Simultaneously, changing pricing models, coupled with the rise of generative AI and the financial constraints faced by enterprises due to escalating SaaS costs, compelled service providers to tighten solutioning and pricing – leaving everyone wondering what the outlook of services pricing will be.
Watch this panel discussion to hear Everest Group’s pricing experts discuss the most compelling pricing trends observed this year and hear the outlook for IT and BPO services pricing in 2024.
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Outsourcing Contract Payment
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High Performance Pricing Teams
Service provider’s pricing team
Deal pricing teams have evolved from providing traditional cost-plus functions to becoming strategic commercial and negotiation partners. Modern pricing teams offer market insights, innovative pricing, and contractual models that enhance deal profitability and success. Learn about the changing dynamics of deal teams, their structures across various types of service providers, and other valuable insights from our analysis of pricing support teams in this blog.
Recognizing that pricing is one of the most important aspects of winning any deal, service providers have created the dedicated function of deal pricing teams to help sales, presales, and solution teams build compelling pricing proposals.
Pricing teams play a vital role in securing pivotal business agreements and ensuring deal success by shaping pricing strategies and contracts. These teams empower sales units to effectively respond to proposals and requests for quotes, ensuring they meet client expectations while also supporting the company’s financial goals.
Today’s pricing teams have transformed into strategic partners to the organization that provides market insights, innovative pricing, and contractual constructs. Their involvement throughout the deal cycle ultimately ensures deal profitability and long-term business success. Let’s first explore how their role has taken on increasing importance over time.
Traditionally, deal pricing teams were comprised of pricing experts with finance and accounting backgrounds who prepared commercial proposals in addition to other tasks like periodic numbers closing, tracking account level parameters, financial reporting, tracking budgets, etc.
In the past, the primary role of pricing support teams has been limited to one or more of the following activities:
Our analysis of various pricing teams across different service providers over the past decade reveals a noteworthy trend to watch: These teams are becoming increasingly important within their organizations and gaining traction as strategic partners in bringing more business.
A deal lifecycle generally consists of anywhere from seven to ten steps from pursuit preparation to final negotiation and contract signing. Historically, the pricing team had limited influence and would only get involved in the last stages of commercials derivation or approvals, pricing proposal preparation, and client negotiation support.
Typically, they were not involved until the commercials preparation stage, and even then would only base their work on the pursuit team’s inputs and the prior decisions made to win the deal, including aspects like solution strategy, commercial modeling, competitive price points, and client pricing options.
The team would calculate the commercial aspects using Excel or web-based tools configured with resource rate data and other financial guidelines, such as margins, contingencies, and discount percentages.
Pricing would be based on two key parameters – resource effort estimates provided by the pursuit team and the cost rates/salaries embedded into the tool, along with commercial guidelines. Depending on the pricing function maturity, the standardization of these tools could vary significantly among service providers.
Next, let’s look at how their roles have progressed.
Leveraging extensive experience in managing deals and accounts over time, the pricing team has started wielding significant influence in mid to large-sized deals. Harnessing their expertise strategically has become a standard practice. However, the impact the deal pricing team has in winning proposals still varies widely based on the maturity of providers across different segments.
Service providers have been taking steps to empower their pricing teams and transform them into strategic partners. New-age pricing teams in today’s competitive market landscape share the following traits:
Pricing tools have come a long way in terms of technology, data, and pricing process maturity. Advanced players today leverage a gamut of connected tools that cover every key aspect of the deal lifecycle, starting from deal qualification to contract signing and then supporting delivery teams after the deal closes.
All parties involved in a pursuit leverage pricing tools at some stage. Tools that seamlessly integrate with critical systems such as Customer Relationship Management (CRM) and knowledge repositories while also harnessing advanced data analytics capabilities have become a prevailing norm within mature pricing organizations.
As Generative Artificial Intelligence (GAI) emerges, the analytical prowess embedded within these tools will push these players significantly ahead of their competitors, making it imperative to establish a solid foundation for these technologies.
Equipped with advanced tools, pricing teams can more accurately anticipate customer needs, enabling them to design pricing strategies precisely and respond to market changes in real time. This degree of agility and customer-centricity will propel organizations far ahead.
Let’s take a look at where different types of service providers stand in their pricing team’s transformation journey.
It is important to note that certain players stand out in their maturity level when compared within the category.
In today’s landscape focused on value realization, organizations must comprehensively analyze all pricing support function aspects on a maturity scale. This is an essential initial step to determine the organization’s current standing and identify ways to stay competitive. Effectively partnering with modern deal teams can improve an organization’s success in winning new business and ultimately succeeding.
For more information about pricing support teams, please contact Achint Arora, Abhishek Biswas, and Amit Dhiman.
Check out the webinar, Current Solution Trends and Their Impact on Outsourcing Deals and Pricing, to learn why is solution sizing important in today’s competitive deal environment.
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