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Clients and vendors find big gains in linking rewards to risks revenues and outcomes
 

Clients and vendors find big gains in linking rewards to risks revenues and outcomes

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Clients and Vendors Find Big Gains in Linking to Risks, Revenues and Outcomes Rewards. A tougher economy, increased competition and constrained budgets are forcing businesses to gravitate towards ...

Clients and Vendors Find Big Gains in Linking to Risks, Revenues and Outcomes Rewards. A tougher economy, increased competition and constrained budgets are forcing businesses to gravitate towards innovative contracting models

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    Clients and vendors find big gains in linking rewards to risks revenues and outcomes Clients and vendors find big gains in linking rewards to risks revenues and outcomes Presentation Transcript

    • © 2013 WIPRO LTD | WWW.WIPRO.COM1 Clients and vendors find big gains in linking rewards to risks revenues and outcomes Knowledge@Wharton- Wipro Future of Industry Series
    • © 2013 WIPRO LTD | WWW.WIPRO.COM2 Clients and Vendors Find Big Gains in Linking to Risks, Revenues and Outcomes Rewards Knowledge@Wharton-Wipro Future of Industry Series: Risk-Reward Models A tougher economy, increased competition and constrained budgets are forcing businesses to gravitate towards innovative contracting models
    • © 2013 WIPRO LTD | WWW.WIPRO.COM3 Risk-Reward Contracts Over Traditional Contracts  Experienced service providers are displaying a bigger appetite for riskier projects that bring more rewards  Competition is forcing companies to be more efficient and improve customer experiences, which drives companies to look for innovative models where Risk-reward contract model could be a good alternative  Risk-reward contracts allow client companies to overcome three types of risks they encounter in the traditional time-and-materials model  Operational risk  Strategic risk  Composite risk “Trust and maturity on both sides are the key prerequisites for risk- reward models to be mutually beneficial”, says Malay Verma, vice president and global head of the Cisco business unit at Wipro Technologies and Ravi Aron, senior fellow at Wharton’s Mack Center for Technological Innovation.
    • © 2013 WIPRO LTD | WWW.WIPRO.COM4 Formats of the revenue models In addition to risk sharing, these models help companies to expand capacity for innovation Pure play revenue-sharing model: Where a service provider develops or maintains a product for a client for a share of the revenues it generates from cost of goods sold Performance-oriented model: Here the service provider agrees to help achieve savings in a specified activity for the client and gets a percentage share of the actual savings Outcome-based contracts: Where a service provider earns rewards if it meets pre- defined criteria or risks penalties if it does not meet them  Product based companies have a higher adoption for risk and reward model  Non-product based companies prefer outcome based compensation
    • © 2013 WIPRO LTD | WWW.WIPRO.COM5 Evolution of risk reward models PROCESS LED SELLING - Where service providers offered to align client processes to create higher efficiencies PARTNERSHIP MODEL - Where service providers are willing to invest with their client- they win and lose together BUSINESS LED SELLING - Where service providers offered to align client processes to create higher efficiencies
    • © 2013 WIPRO LTD | WWW.WIPRO.COM6 Making Risk-Reward Contracts Work  Both the client companies and their third party vendors must bring a high degree of trust and maturity to the relationship  Vendors must ensure they have the right qualifications, such as the financial stability to assume capital risks  Vendors must possess the requisite technological expertise  For a successful implementation of risk and reward contract, flexibility is very important factor  Appropriate governance structures must be in place
    • © 2013 WIPRO LTD | WWW.WIPRO.COM7 Conclusion Risk-reward models do not necessarily work well only in economic down turns - These models help share risks, cut costs, bring expertise and drive innovation-so companies will swear by them.
    • © 2013 WIPRO LTD | WWW.WIPRO.COM8 For more details please visit the link below: http://www.wipro.com/insights/academia- collaboration/wipro-FOI-K@W-series/clients-and-vendors- find-big-gains-in-linking-rewards-to-risks-revenues-and- outcomes
    • © 2013 WIPRO LTD | WWW.WIPRO.COM9 Knowledge@Wharton is the online business analysis journal of the Wharton School of the University of Pennsylvania. The site, which is free, captures relevant knowledge generated at Wharton and beyond by offering articles and videos based on research, conferences, speakers, books and interviews with faculty and other experts on current business topics. The Knowledge@Wharton network — including Chinese, Spanish, Portuguese, Indian, Arabic, Israeli and High School editions — has more than 2.1 million subscribers worldwide. For more information: http://knowledge.wharton.upenn.edu About Knowledge@Wharton
    • © 2013 WIPRO LTD | WWW.WIPRO.COM10 About Wipro Ltd. Wipro Ltd. (NYSE:WIT) is a leading Information Technology, Consulting and Outsourcing company that delivers solutions to enable its clients do business better. Wipro delivers winning business outcomes through its deep industry experience and a 360 degree view of “Business through Technology” - helping clients create successful and adaptive businesses. A company recognized globally for its comprehensive portfolio of services, a practitioner’s approach to delivering innovation and an organization wide commitment to sustainability, Wipro has a workforce of 140,000 serving clients across 57 countries. For more information, please visit www.wipro.com. For more information, please visit www.wipro.com
    • © 2013 WIPRO LTD | WWW.WIPRO.COM11 Thank You ©Wipro Limited, 2013. All rights reserved. For more information visit www.wipro.com No part of this document may be reproduced in whole or in part without the written permission of the authors. Wipro is not liable for any business outcome based on the views presented in this document. For specific implementation clients should take advise from their client engagement manager.