Emergence of outcome-based model in IT services

Abstract

Software is the intellectual capital output of the codified knowledge of a programming team. Unfortunately, there does not exist a valid or reliable measure to value software. The trend has been to align pricing to the aspects that buyers realize value from. Vendors need to understand the value they provide to their customers and create a price structure that aligns pricing with actual value realization, and more importantly facilitates the business objectives of the service. This report attempts to study the evolution of pricing models of IT services from the traditional input and output based approaches to the more recent outcome based approach. We try to demystify the concept of outcome as it applies in the context of software services and then attempt to develop a service delivery framework based on the outcome based approach. In this context we have studied 3 engagements where the outcome based service delivery model has been put into practice and tried to gain an understanding of the practical challenges, risks and rewards of this method.