Outcome-based outsourcing

iGate’s new ad campaign launched today promoting “Outcome based “outsourcing business model has pushed  the IT companies relying on the  conventional outsourcing methods  to redesign their business strategies. What is this “Outcome based business model” ?

While the traditional  “time and material” business model provides client with support services including the hardware , software and manpower requirements and charge them with the per hour per employee basis, the “Outcome based” outsourcing business model shares the project risk with the client.

In the “Outcome based” model , the service levels and deliverables are pre determined and agree upon at a fixed price. The risk and cost associated with the changing technology or resources needs are endured by the supplier company not client.

Advantages of the model

1. Client pays for the results and outputs  and not for labor cost per hour.
2. Client is free from operational issues like screening or monitoring supplier’s staff
3. The model encourages innovation at supplier’s end.
4. It ensures that client’s IT knowledge and expertise is preserved.
5. It enables  risk mitigation.

Outcome-Based Business Model, with shared risk and investment maintains  sustainable value by aligning IT outcomes with business goals .It bring out industry’s best practices and improve quality of client-vendor relationship.

Though companies like Perot Systems and CGI are already following “Outcome based” business approach, its not a fit for all IT outsourcing solution providers as it has its own shortcomings and risk analysis.