Technology Expense Management (TEM) empowers organizations to optimize and streamline costs and operations for IT assets and services. The service assists companies in managing their technology more effectively. It does this by reducing technical debt, improving financial oversight, and handling IT infrastructure. This includes areas such as telecommunications, mobile technology, cloud computing, software, and IoT.
However, not all TEM solutions offer the same benefits. Offshore TEM providers typically charge fixed or variable fees. These fees depend on the volume of work completed rather than quality of work. At first glance, these low-cost models seem attractive, but they come with drawbacks.
Traditional fee-for-service models do not encourage providers to prioritize delivering the best outcomes for clients. Instead, they may be more focused on increasing the complexity of their work. Additionally these providers may prioritize work quantity over speed or value.
A more effective approach is partnering with a TEM provider using an outcome-driven contract. This model bases charges on the results achieved for the client. By rewarding providers for accomplishing desired outcomes, such as cost savings, operational efficiencies, or strategic benefits, clients enjoy increased accountability and transparency.
Outcome-driven contracts can vary according to client needs and preferences, with examples including:
- Shared-savings contracts: Providers charge a percentage of the savings generated for the client.Â
- Performance-based contracts: Providers charge based on achieving predefined key performance indicators (KPIs), objectives outlined in service level agreements (SLAs), customer satisfaction, or return on investment (ROI).Â
- Value-based contracts: Providers charge according to the strategic or transformational value delivered, such as innovation, growth, or competitive advantage.Â
By selecting an outcome-driven contract, clients benefit from:
- Lower and more predictable costsÂ
- Higher and more sustainable valueÂ
- Stronger collaborative partnershipsÂ
Technology Expense Management (TEM) offers significant benefits for organizations seeking to optimize and streamline their IT costs and operations. Traditional offshore fee-for-service models may not offer the best value or quality.
Outcome-driven contracts, on the other hand, can better meet clients’ needs. These contracts focus on delivering specific results rather than just providing services. By aligning incentives with desired outcomes, clients can ensure they are getting the most value for their investment.
Choosing a TEM provider that offers outcome-driven contracts ensures that clients pay for measurable results rather than tasks. By using outcome-driven contracts, clients can save money, increase value, and build better partnerships with suppliers. Learn more about outsourced Technology Expense Management and how E78 can help you uncover value through cost savings.
