For Professional Services, Head-Count Pricing Is Overrated

Traditionally, professional services were priced the same way as most business operations — the bigger the project, the bigger the head count. Under this model, labor was seen primarily as the cost of doing business.

Today, however, the head-count pricing model is no longer optimal for professional services, a better model is Managed Services.  This model benefits both the professional services firm and its clients – a classic “win-win” situation.

There are multiple reasons for this change in pricing model, but for now, let’s consider these:

As a result of greater competition, management looks to lower operational costs, and IT departments are being asked to help drive revenues.

• As business has gotten increasingly competitive, as well as more complex, it’s become clear that simply hiring more staff is no longer a cost-effective model. Measuring outcomes makes more sense than measuring effort.
• In order to be successful, today’s Chief Information Officer must now be proactive in terms of supporting an organization’s business goals through sustainable growth initiatives.

How can a managed services model benefit both the service provider and the client, you might ask?

The managed services model, in fact, signifies a paradigm shift in business and is an interesting example of how both provider and client can benefit at the same time. Among the benefits to the client include:

• Reduction in costs as the service provider takes responsibility for and assumes the related risks of delivery of services
• A predictable fixed price and ROI; results are also guaranteed through service levels
• Business innovation is realized
• The satisfaction of the client’s customer increases

For the provider, in turn, there is increased stability in assuming a deeper relationship with a client than simply providing an outsourced service. As a partner in innovation, too, supporting the client’s business goals helps accomplish the provider’s goals, as well.

How then can an organization take advantage of this competitive edge as well as the resulting increase in the satisfaction of its customers?

It all begins with asking a simple question – would my organization be better off with a managed service model?

It’s a critical question to consider, especially because your competition is asking itself the same question.