The challenge of pricing – for an IT service provider
While an end-to-end management approach provides a competitive service advantage, it can carry a substantial additional – and often unforeseen – cost and risk. The challenge is that it’s difficult to estimate the costs of all downstream variables and potential problems. It is for this reason most software providers work on a Time & Material basis, whether it’s for, say, creating a custom application or the migration of a set of applications onto a new enterprise platform (e.g. porting legacy accounting, inventory and reporting systems into a new ERP solution).
The inevitable – and frequently unforeseen – management and consultancy requirements that typically crop up during a project are usually charged at a day rate, which can become a very risky exercise as costs and timescales creep higher.
What this service provider needed to know was whether offering a full life-cycle management service and incorporating all aspects of service delivery management (including these unforeseen professional services requirements) made sense as a viable business model.
Could it be realistically packaged on a fixed price basis while safeguarding the provider against loss? Finding the answers to this question was what lay at the heart of the study, and involved an in-depth research and drill-down analysis.
Read all about it here