The country’s BPO sector is exploring new pricing models to address concerns arising from salary inflation, higher employee engagement costs and impact of currency fluctuations on their offshore outsourcing deals.
Pricing in the sector has evolved from full-time-equivalent (FTE) pricing,which is a way to compare and benchmark the total hours put in by the workforce, to transactional pricing, which is paying as you use the products and services instead of paying upfront.
As the Indian service providers move up the value chain and now offer more non-voice, platform-based services, simultanously their pricing models have also evolved. ?Clients now want to see the BPO service providers demonstrating functional capabilities and competency and not just transactional capability,? S Swaminathan, chief executive and managing director, Infosys BPO said.
Transactional based pricing is again expected to evolve even further in a couple of years to business outcome based pricing. ?That is what I think BPO firms and clients are working towards. Once you get your base lines (mutual terms of understanding) right, then everyone will go on to share the rewards and the penalties,? Swaminathan said.
Industry experts say that going forward the movement has to be more towards getting paid for performance than paid just for effort. ?Today the percentage of contracts that are performance-linked have gone up significantly,? Shantanu Ghosh, global head (practices, solutions and transitions), Genpact said.
In Genpact, the percentage of revenue coming from risk-reward model as compared to fixed price is right now a small portion. About 10-15% have much larger performance focus than just effort focus, Ghosh added.
?It is not easy from an implementation perspective because of the organisation structure, budgeting models that everyone is following over many years. There are other practical challenge also,? says Ghosh.