There is an increased enterprise propensity in the market for committed outsourcing outcomes and the same is manifesting itself in increased instances of outcome-based pricing contracts. However, what construes as “outcome” can vary across contracts. Some points to note:
- “Outcomes” can range from clearly defining tangible end-states, and/or clearly establishing scope, milestones, and deliverables in IT and BPS Strategy & Change contracts, delivering XLAs/BLA targets, self-funded transformation programs that avoid upfront surge in expense and cash outflow
- Enterprises want to ensure more skin in the game for providers till the end of engagement term; equitable risk and reward sharing – typically capped risk and reward as opposed to pure pain/gainshare constructs
- Most enterprises and providers align on a complimentary due-diligence to get a sense of the enterprise environment before engaging in an outcome-based contract so as not to go in “blind” with an unclear view on risk or rewards
Therefore, the definition of “outcome” may vary, but the model is expected to sustain and gain momentum across contract types.