The current outsourcing model of traditional ‘time-and-material’ model where clients pay technology vendors based on the cost of labour and material used and clients are billed on an hourly basis will undergo a slow but steady change. More and more clients are looking at this model to change into something more quantifiable and noticeable in terms of benefits.

There are already few companies including a a major India pure play firm that has been vocal about breaking this model with its out-come based strategy that would charge clients solely for the outcome of a project.  Imagine what this change could get to India pure play firms now seeing saturation in the outsourcing market with economic situation world wide.   US is its largest market contributing majority of   outsourcing revenues for outsourcing firms with over 60% of its revenues from North America.

The older and larger firms will still continue to sell the T&M till the new model gets traction and as smaller firms notch up some wins with models based on ‘results’ and ‘outcomes’ and not necessarily on efforts.

This provides more transparency and insights into the true ROI of outsourcing dollars. With CFOs looking more closely into the outsourcing costs from the bottom line perspective and to sustain their current outsourcing efforts this will gain momentum in the days to come. The traditional model will stay active and it its downward trend will be based on how quickly large corporations and smaller businesses adapt to the newer and encouraging model.

This model is not new to industries outside IT.  Health care companies in US have utilized this model with limited success, the limitation is more due to its own fear of losing $$ at the cost of consumer.

Watch this blog for more updates in the days to come..

This is truly interesting.