Gartner Research

Pricing Model Definitions, Benefits and Risks for IT Services and Outsourcing Contracts

Published: 30 April 2008

ID: G00156670

Analyst(s): William Maurer , Frank Ridder , Lorrie Scardino , Kris Doering

Summary

Organizations use various pricing models, but not all organizations define and use them the same way. Pricing models also have varying pros, cons and risks. Use Gartner's definitions and analysis to make informed decisions when selecting a pricing model for IT services and outsourcing contracts.

Table Of Contents
  • Overview
  • Introduction
    • Make Pricing Model Decisions Early and Revisit Them Often
    • The Organization, Not the Provider, Should Define the Pricing Model
    • Risk Is an Important Factor in the Context of Pricing Models
  • The Eight Most Commonly Used Pricing Models
    • T&M
    • Fixed Price
    • Cost Plus
    • Open Book
    • Unit-Based/Use-Based
    • Incentive—Based
    • Shared Risk/Shared Reward
    • Gain Sharing/Business Benefits Based
  • Additional Factors to Consider When Making Pricing Model Decisions
    • Balance of Risk Between Organization and Provider
    • Alternative Delivery and Acquisition Models Will Affect Pricing

©2019 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. and its affiliates. This publication may not be reproduced or distributed in any form without Gartner’s prior written permission. It consists of the opinions of Gartner’s research organization, which should not be construed as statements of fact. While the information contained in this publication has been obtained from sources believed to be reliable, Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner research may address legal and financial issues, Gartner does not provide legal or investment advice and its research should not be construed or used as such. Your access and use of this publication are governed by Gartner’s Usage Policy. Gartner prides itself on its reputation for independence and objectivity. Its research is produced independently by its research organization without input or influence from any third party. For further information, see Guiding Principles on Independence and Objectivity.

Already have a Gartner Account?

Become a client

Learn how to access this content as a Gartner client.