The Outsourcing Pricing Decision

Posted by John Hooper,
Senior Vice President, Business Development and Client Relations, HGS Canada

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Congratulations! After months of due diligence, you’ve selected the contact centre provider you feel will best solve your problem and provide the right solution. All that’s left to do is finalize the price and you can move towards implementation.

But wait. The contact centre provider you chose can’t get to the price you anticipated and budgeted for. Now what do you do?

I see this scenario play out on almost every deal I have ever worked on in the business process outsourcing (BPO) space because there is a flaw in this process. The question you should be asking yourself is, “Is the price the actual price?”

Traditionally, contact centre outsourcing opportunities were priced by productive hour or minute. However, according to a recent study by Everest, an increasing number of outsourcing deals use a hybrid pricing model, which can be any combination of fixed-fee, transaction-based, FTE-based, or outcome-based pricing. The same study found that although outcome-based pricing is not used as a standalone model, it has the second highest inclusion rate (69%) within a hybrid pricing structure. FTE-based pricing is still used 80% of the time, while transaction-based and fixed fee pricing are used 67% and 42% of the time, respectively.

What this means is that creativity can be applied to the pricing model to ensure a win-win situation for both the buyer and the provider. Most importantly, if you find yourself in a situation in which your preferred provider appears to be more expensive than the competition, you should take a closer look at how the deal can be restructured. In the case of existing providers, when you have historic performance data available, always examine the real cost of service. For example, Provider A may propose a lower productive hour cost than Provider B, but if Provider B has a higher first call resolution rate or better interval compliance, the actual cost of service may actually be less expensive than Provider A.

Though this is a potentially unique example, I wanted to share this to prove a point and to exemplify an old saying – if it is too good to be true, it usually is. In our world, the lowest price does not always equate to the best value or the best choice for you and your customers. You have to go beyond just the price to fully understand the various capabilities of your potential provider, what value added services they can bring to further reduce costs over time through self-help, call reduction strategies, etc.; what new services they provide to increase revenue; best practices they deploy to improve customer satisfaction, and so on.

Just remember that in business, as in life, you get what you pay for.

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