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.