Price Benchmarking - Time to Take a Hike?

13 Dec 2011



It is common knowledge that pricing of IT outsourcing services dipped during 2009-10 on account of substantial pressure from buyers hit by global recession. Not only did they sign new deals at lower price points, they even renegotiated the existing relationships at substantially discounted rates.

However, currently, there is a widespread counterattack by service providers to argue that these pricing concessions are no longer sustainable and prices need to increase soon. Indeed, we came across several instances of buyers being pressurized by providers to increase the contracted pricing. COLA, consumer price index, wage inflation, etc., are being discussed as the reasons for an impending price increase. The question on the minds of the key stakeholders in the procurement or sourcing department is, "should I now be prepared to pay more for the same services?"

This viewpoint highlights three common arguments that support a price increase. It also examines the rationale behind each argument and whether it should practically lead to a price hike or not.


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