In the current finance and accounting outsourcing (FAO) scenario, service providers offer flexible pricing options to clients – fixed term, full time employee (FTE), transaction, and outcome-based pricing models. Among these, the traditional FTE model is fairly simple to execute and evaluate. However, it falls short of providing maximum value to both clients and service providers.
Therefore, next-generation buyers or clients expect outsourcing partnerships to provide more than just a fixed number of employees. They expect that service partners join forces and help them achieve business outcomes and share risks. As a result, innovative outsourcing partners are increasingly offering the best-fit pricing model for long-standing partnerships – outcome-based. Also known as gain sharing, the outcome-based structure dictates that service partners are paid only when pre-agreed business outcomes are achieved.
This drives the fundamental advantage of outcome-based pricing model - mutual benefits. Clients are encouraged by higher cost savings, value maximization, and focus on business outcomes. Service partners, on the other hand, look forward to higher risk appetite, better understanding of client businesses, and adding more value.
A word of caution – outcome-based pricing has certain inherent uncertainties based on factors that are not completely under the control of service partners. The following provides eight best-practices for a win-win outcome-based pricing model.
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BPO Future Forward: 8 Best Practices for a Win Win Outcome-Based Pricing Model
1. THE FINANCE & ACCOUNTING (F&A) SERIES
8 best practices for a win-win outcome-based
@Infosys_bpo #FAO
pricing model
2. THE FINANCE & ACCOUNTING (F&A) SERIES
8 best practices for a win-win outcome-based pricing model
Outcome-based pricing models are relatively new, but deliver
tangible value to clients and outsourcing partners. However, the
challenge lies in getting the pricing structure right and putting in
place the right operational controls. Here are 8 best practices to
create an outcome-based pricing model that delivers long-term
@Infosys_bpo #FAO
mutual gains to an outsourcing partnership.
3. THE FINANCE & ACCOUNTING (F&A) SERIES
8 best practices for a win-win outcome-based pricing model
1
@Infosys_bpo #FAO
Outsourcing
partners need
adequate time to
meticulously
understand client
businesses and
define sound
baselines
2
Innovation boards,
strong reporting and
governance
structures, and
regular meetings
identify the right
business outcomes
OFFER A WARM
UP PERIOD
DRAFT A
BLUEPRINT
4. THE FINANCE & ACCOUNTING (F&A) SERIES
8 best practices for a win-win outcome-based pricing model
3
@Infosys_bpo #FAO
Joint reviews of data
and processes
ensure
confidentiality of
financial
information, identify
errors, and mitigate
fraud
4
Calculation of
quantifiable results
and benefits upfront
mitigates
misconceptions
INTRODUCE CHECKS
AND CONTROLS
SET MEASURABLE
OUTCOMES ONLY
5. THE FINANCE & ACCOUNTING (F&A) SERIES
8 best practices for a win-win outcome-based pricing model
5
@Infosys_bpo #FAO
Identification of
client dependencies
creates
accountability for
process delays and
inaccurate
information
6
Exhaustive
documentation of
business
components that will
be impacted by the
pricing model, right
at the start, provides
clarity
DEFINE REVERSE SLA AGREE ON THE SCOPE
6. THE FINANCE & ACCOUNTING (F&A) SERIES
8 best practices for a win-win outcome-based pricing model
7
@Infosys_bpo #FAO
Create payout caps,
which help
avoid extreme
volatility and
hedge some risk
8
Compulsory inputs
from pricing, domain
and process teams
creates the best-fit
pricing model
ADD RISK
PREMIUMS
INVOLVE KEY
STAKEHOLDERS
7. THE FINANCE & ACCOUNTING (F&A) SERIES
8 best practices for a win-win outcome-based pricing model
@Infosys_bpo #FAO
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