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Why shifting from cost based solutions to outcome-based solutions is crucial?

The prime objective of service providers is to regulate their activities in a direction that fulfil business goals when looking to modernize technology solutions. It is important to proceed with the correct strategy that helps achieve success and growth for the concerned business. As an organisation becomes more complex, identifying these business drivers becomes more difficult and hence the industry and market themselves define their drivers that help implement advanced technologies.

While commercializing is creating opportunities for customers of information technology services, it is simultaneously creating new challenges for the service providers.

Pricing strategies are one of the most important challenges and decisions for today’s IT service providers. Costing strategies for IT services have usually focused on covering costs, attaining desired margins, and challenging the competition.

Cost-Based Solutions

When a company uses cost-based solutions, the organization sets up a price based at a percentage above the cost it incurs to manufacture the product or to provide the service. The planned strategies relate to the organization’s decision to fixate the price of a product on the costs of production rather than external factors such as competition or the economic environment. This is a conventional approach to pricing which may be appropriate in stable markets where competition is moderate. The cost-based pricing method is widely used by industries such as utilities, contracting, building IT solutions, engineering firms, consulting services, etc. In the case of professionals like IT consultants, engineers, etc., ‘service fee ‘ is the pricing strategy used. This is based on the cost of time involved in providing service.

Outcome-Based Solutions

Outcome-based pricing is a strategy of setting prices primarily based on a consumer’s perceived value of a service. Value pricing is customer-focused pricing, meaning companies base their pricing on how much the client believes the service is worth. Companies that offer exceptional or highly valued & unique features in services are better positioned to take advantage of the value pricing model than companies that chiefly sell commercialized services. Any company involved in value-based solutions must have a service that differentiates itself from the competition. Speaking in literal terms, the product must be customer-centric, meaning any advancement and added features should be based on the customer’s needs and wants. Of course, the service must be of high excellence if the company’s management is on the lookout to have a value-based pricing strategy. The company must also have open communication channels and strong relationships with its customers. In doing so, companies can obtain feedback from their customers regarding the features they’re looking for as well as how much they’re willing to pay.

Technology changes within service vendors have typically been driven by challenges related to infrastructure management and the assurance of service supply. However, new business drivers are now more relevant when evaluating the need for an advanced technology solution. Major factors reckoning for this price pressure comprise the increasing intricacies of CIOs and other tech buyers, startups with competitive pricing strategies, and the wide accessibility of open source software and free offers. Such price pressure, combined with internal and external imperatives to deliver volume, results in rapidly declining prices, threatening the long-term profitability of tech players

Solutions in the market must provide a full scope that helps organizations to operate efficiently without incurring great costs and efforts associated with the integration of several systems and, at the same time, that allows the timely response to the demands of a highly changing industry.

Why Value-based Solutions are Better than Cost-based Solutions?

Wrapping up, the above concept clearly states how outcome-based technology solutions can help organizations work efficiently without adding extra costs associated with the inclusion of different systems and ensures timely delivery to the customers in a volatile industry. It is always better to approach a professional software development solutions provider that believes in providing value-based solutions to its customers along with promising excellence in their field of work that will help your organization in navigating towards the right future.

A custom software development company that helps in re-imagining innovation & re-inventing business operations through utmost design and technology.

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