Clients and services partners have talked for years about linking services partner pricing to business goals. However, traditional pricing models such as time and materials and fixed fee still dominate in services partnerships; examples of truly innovative pricing models are rare. Despite the rarity of these outcome-oriented pricing models, interest remains high. Clients frequently ask Forrester for examples of next-generation, innovative services pricing models. So, I’m writing this post to highlight two recent examples (showcased at March customer and analyst events) that truly push the envelope for services pricing models linked to business goals.
Example 1: Venture-based
At BearingPoint’s recent analyst summit, the EMEA-centric business consulting provider showcased multiple examples of venture-based engagement. The examples showcased go beyond the typical “VC fund” that we see at other services providers (in which an arm of the services vendor operates like a venture capitalist by doling out funds to a set of early-stage companies). Instead, BearingPoint gives consulting time and tools to select clients or alliance partners in return for equity. For example, Bearingpoint has a services-for-equity partnership with tracekey, an early-stage company focused on track and trace functionality for pharmaceutical companies. This means that Bearingpoint’s financial rewards are directly tied to tracekey’s results, without getting tangled up in managing to the contract terms or project dashboards.
The IT services industry is being challenged on two opposite fronts. At one end, IT organizations need efficient, reliable operations; at the other, business stakeholders increasingly demand new, innovative systems of engagement that enable better customer and partner interactions.
My colleagues Andy Bartels and Craig Le Clair recently published thought provoking reports on an emerging class of software — smart process apps — that enable systems of engagement. In his report, Craig explains that “Smart process apps will package enterprise social platforms, mobility, and dynamic case management (DCM) to serve goals of innovation, collaboration, and workforce productivity.” In other words, smart process apps play a critical role in filling gaping process holes between traditional systems of records and systems of engagement.
Let me start off this post on a downbeat note: Improving sustainability is not a high priority for companies, according to data from the recent Forrester survey of business decision-makers. The survey, part of Forrester's Forrsights research, was fielded to 2,600 executives with budget authority at companies in Europe, North America, and Asia during the fourth quarter of 2010.
When we asked these corporate decision-makers about their company's top business priorities, revenue growth was #1, customer retention #2, and cost-cutting #3 (see Figure 1 below). Improving the corporate sustainability posture? Oops, it's down at #10, with just 10% of respondents indicating that sustainability is one of their firm's high priorities for 2011. When we cut those numbers by industry grouping, utilities/telecoms and public sector/healthcare are highest, with 15% prioritizing sustainability, compared with a low of just 7% in financial services.
Now, I'd like to contrast that eye-opening data with a much more optimistic set of figures from our recent research about the growth of sustainability consulting services. My colleague Daniel Krauss and I have worked with many of the large consultancies over the past few years and seen their sustainability practices grow from practically nothing to very substantial businesses.
Among 21 consulting firms that we surveyed late last year, 17 have a dedicated sustainability practice, and five of those count more than 1,000 practitioners (see Figure 2).