I have written about, and patiently waited for many years, to see outcomes based pricing and contract relationships to come to the fore in the delivery of IT or business processes. I had expected them to be most prevalent in mature markets, as process understanding, consistency and maturity is strongest.
Despite these advantages the uptake of outcome based pricing in these mature markets has been underwhelming. There are a few reasons for this, including:
- Lack of mutual trust
- Reluctance to take risk in a flat economic market
- Relative inability by vendors to develop assets, hence reliance upon bespoke solutions
- Time and subsequent cost required to strike the deal
When one focuses on emerging markets, particularly in the Asia Pacific region, the story is very different. In Australia, Japan and Singapore, outcome based pricing is still an exception, for domestic clients markets such as Indonesia, India and China it is on track to become the rule than the exception. Outside of the Asia Pacific region, capioIT is seeing similar deals in Africa, Latin America and the Middle East.
This is a staggering and exciting outcome and yet more proof if needed that emerging market organisations are the champions at leapfrogging legacy technology and business processes. The uptake of such deals has been in many varied sectors including:
- Managed Services Provider
- Financial Services
- Natural Resources
- Public Sector Citizen Service Delivery
Some of the key offerings that have been engaged in these services include:
- Telecommunications Provider Billing
- Customer Contact Centres
- Social Media Management
The driver for this adoption of outcomes based pricing is simply growth. Many organisations in these markets are growing at a rate that creates unsustainable pressure on business process and the ability to deliver. As a result they have no choice but to enter into such deals in order to ensure that they can deliver required outcomes to their customers.
Skills and a less rigid legacy approach to risk also support the growth. On the vendor side, many emerging markets have been slow to uptake IT and business process related services, as a result they have enabled more flexible deal engineering.
Bottom Line – Outcomes based pricing deals are real and happening in emerging markets. The value of lacking legacy is being exploited by both buyer and seller. This will drive innovation and competitive advantage through across economies, so the benefits (and lessons to be learnt in mature markets) are significant.
If you require further information, please contact Phil Hassey, Founder capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. Phil may be contacted by email below,