EDS's decision to offer businesses flexible service
options will help IT departments cut costs without losing service
levels. EDS's new model will allow customers to take out services
while not paying as much up front.
For example, a business could pay for a higher level service for
one application, which is business-critical, and a lower level for
an application that is not as important. In the past, service
levels were not as flexible and companies could be paying more than
they needed to for certain services.
Andy Gallagher, consultant at Compass Management Consulting,
says all suppliers are trying to introduce flexible pricing, but
the schemes so far have not been successful. "Every supplier has to
prove it has the capacity to be flexible because it is the ticket
to the party in the current economic climate."
Flexibility in pricing
IT departments are now seriously looking at
on-demand services as an option as they try to control
operating costs.
"What I hear from businesses is that although the suppliers are
offering more flexible pricing, the models are too complex for
businesses to be able to assess whether it isthe right decision or
not," says Gallagher.
Phil Morris, European managing director of sourcing consultancy
Equaterra, says a flexible model is ideal under current market
conditions.
"
Anything that allows flexibility of pricing and service is a
good idea, as long as there is real flexibility."
He says past attempts by suppliers to introduce flexible pricing
have failed because the deals were not flexible enough.
Flexibility is important at the moment because businesses want
to reduce spending, but not the level of service they get on
business-critical services," says Morris. "They can tone down the
service level agreement to fit their needs," he adds.
Gallagher at Compass says flexible pricing that is easy to
understand is essential during tough times.
Flexibility in practice
One company that has been using a flexible model for two years
is Indian IT service provider Infosys.
BG Srinivas, head of Europe at Infosys, says that although its
model is mature,ithas yet to take off, although he believes
thecurrent economic climate will change this.
The company offers services which charge companies according to
the number of transactions they make. For maintenance, it can
charge IT departments on the number of helpdesk calls.
Infosysalso sellsits intellectual property to clients so they
can reuse certain software that has been developed.
Srinivas says the uncertain economic environment means
businesses cannot predict the volumeof servicethey requireand are
also trying to reduce capital expenditure. "This will increase
interest inthese services."
He says that businesses have not taken up the services in large
numbers because they have been doing good business and have not
identified their requirements. "There are challenges for businesses
moving to an on-demand model, such as letting go of what they
already have."