Traditional outsourcing agreements have been defined by charging on a time basis, with either hourly, weekly or monthly charges, or for defined outputs, where they are clear and unambiguous. Time based charges can be challenging to manage, with inefficiency incentivized through using a charging mechanism that provides more profit for more time spent delivering services. The use of automation in delivering services is enabling a new and different way of charging based on sharing measurable outcomes and sharing risk between the buyer and the supplier. This paper will explore options for charging, their pros and cons and how technology is enabling the transition to more sophisticated charging bases.

Secondly, for those companies with their own Global Capability Centers (‘GCCs’), there is much debate as to whether pricing should be (i) with the objective of recovering the cost of operation from its users, (ii) with the objective of recovering the cost of operation plus a profit from its users or (iii) charging at rates that are used by third-party operators in the industry. Each of these options has advantages and disadvantages, but the most appropriate model for your company requires detailed consideration.

How A&M Can Help

Alvarez & Marsal can help you to design charging mechanisms that incentivize performance, with shared risk and reward, especially leveraging technology solutions, and determine the optimal charging bases for your GCC operations.