VARIABLE-PRICE

OUTSOURCING
BY:
MIEANNE DELA ROSA
JOHN LOID DE LEON
JHONALYN GALDONES
INTRODUCTION
There are variety of pricing approaches to BPO. By far the most common is the
fixed-price contract where a vendor manages a buyer’s process and gets paid based
on meeting pre-established performance. Usually imposed in a small-to-medium
sized enterprises (SMEs) or for firms that are struggling to meet financial goals.
Making commitment to large fixed-price contact when the benefits lie far off in the
future can be difficult. If there were no pricing alternatives, many firms would not
consider outsourcing option.

To overcome this pricing barrier vendors of BPO have developed variable price
outsourcing strategies.
Variable Pricing Outsourcing

- Allow firms to pay only for the capacity they

use or only for performance-related outcomes.
CASE

outsource
AXA Data Center

- multinational insurance firm

- engages in global insurance, investment
management and financial services
- located in the 8th arrondissement of Paris
- employs 140,000 people (has 50 million clients)
CASE (highlights)
 AXA is looking for an IT services that provide variable-level of pricing.
 They wanted to pay only for the capacity they will actually used in a
given period of time.
 Vendors of BPO balked at this arrangement because that was not
how their outsourcing deals with regards to IT services.
 AXA’s determination that it did not want a traditional outsourcing
arrangement came early on in the process.
 With on-demand storage and computing, clients get more out of
existing IT invesments and pay only for the resources used.
BPO buyers increasingly are demanding variable-pricing approaches,
and vendors are responding.

At the same time, pay-as-you-go pricing models have several

drawbacks that managers must consider and monitor. Under such
pricing scheme, a cost conscious manager in the BPO buyer firm
might encourage staff to minimize use of the vendor’s services in an
attempt to minimize their chargeback that will result to less productive
employee.