Introduction

Suppliers are using a wide-spectrum of pricing models in the BPO industry – FTE based, transaction based, outcome based, and hybrids created by combining pricing models. FTE-based pricing has been the most prevalent pricing model in finance and accounting outsourcing (FAO) due to its ease of application. However, a pure FTE-based pricing regime cannot cope with the increasing buyer sophistication and competitive intensity in the FAO market as it does not align pricing with business needs/outcomes, often making it difficult to deliver impact beyond cost arbitrage. Consequently, the FAO market is now experimenting with transaction-based pricing and other more evolved pricing models.

While transaction-based pricing delivers some key benefits, it is not applicable to all buyer situations. As with all pricing models, transaction-based pricing is not a nirvana for all pricing woes and needs to be applied selectively based on the buyer-supplier situation.

Contents

The purpose of this whitepaper is to educate stakeholders about transaction-based pricing, highlight situations where it is applicable, and introduce a framework for implementation of transaction-based pricing. The paper discusses:

• The spectrum of pricing models and their prevalence in the FAO market
• The challenges faced by FTE-based pricing, and factors promoting adoption of more evolved pricing models such as transaction-based pricing
• The framework for implementation of transaction-based pricing and best practices, illustrated with a case study