With rapid growth of outsourcing industry in the past two decades there is a need for new pricing models that meet the changing expectations of customers. Initially, most of the value proposition was built on simple manpower replacement, which led to widespread use of FTE based pricing model. Increasingly, customers have started looking for benefits beyond cost savings and service improvements. This has led to emergence of pricing models like transaction based pricing and outcome based pricing, which is also known as Royalty Based Pricing.
- Closely tied to customers business outcome
- Properly aligns customers and service providers interest to encourage partnership, innovation and continuous improvement