Price management in IT outsourcing contracts. The path to flexibility

IT outsourcing contracts are known for their use of a fixed price. This happens mainly due to the need of the customer to accurately budget its IT operation costs. However, nowadays, the use of fixed price is regarded as an unfair approach for customers, consequently, private and public organizations demand flexible prices. As a result, IT providers are asked to abandon the fixed price and find new service delivery models suitable with a flexible price. This research seeks to develop a pricing model capable to help on service delivery whilst adds price flexibility on IT outsourcing contracts. The major contribution of this research is based on service unit identification, demand estimation, price setting and cost calculation, which are essential steps for a good contract execution. To develop our research, design science research methodology was applied. The desired flexibility is added through the balance between fixed and variable demand resulting in a mixed approach that satisfies customers and allow profit optimization. The proposed model is adaptable to each business deal.