Customers are asking for more fixed price and we would also like to do more fixed price – Infosys COO
While large IT companies are on course to break the linearity between headcount and revenue through fixed-cost pricing, smaller companies under pressure for survival are slowly resorting to outcome-based billing. This helps clients to mitigate business risks and also builds confidence in vendors during tough times, say industry players.
As companies gain expertise in particular domains and when project methodologies mature, they move to fixed-cost billing. Unlike the existing system, buyers do not have a say on the number of people to be employed. Under outcome-based pricing, the IT vendor takes a nominal fee upfront and gets the remaining amount over multiple years as a percentage of business value created for the client.
"Fixed price has gone up. That is the reflection of the time, customers are asking for more fixed price and we would also like to do more fixed price because that is an opportunity where we can get benefit out of the productivity improvement we bring to the table," said SD Shibulal, chief operating officer of Infosys Technologies Ltd. According to R Chandrasekaran, president and managing director – global delivery, Cognizant, value-based billing has a long way to go. However, almost all large deals these days come with strict service-level compliance and productivity improvement clauses. About 25 percent of Cognizant's revenue comes through such fixed-cost bids, he said.
Source: Financial Chronicle
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