In any organisation, irrespective of its size, it is crucial to manage processes effectively and to strive for reducing costs, time and quality optimisation. From an organisational perspective, setting clear goals that are also measurable is the foundation for efficient management and project implementation. It is important that these goals not only address technological and operational challenges, but also have a direct impact on business outcomes such as cost reduction, increased efficiency and improved service quality.
It is worth noting that we use the term ‘IT partner’ instead of ‘IT provider’. We believe that the term ‘partner’ better reflects the nature of a relationship based on trust, long-term cooperation and the joint pursuit of goals. You can read more about this in our article “What is the difference between a partner and a supplier?”.
Before you choose an IT provider: A checklist of questions you need to ask
It’s a good idea to start setting priorities by asking the right questions to help clarify expectations of your IT partner and set clear goals. Download an extensive list of questions in PDF format 📧 – find out what questions you should ask before you start working together.
What is performance-based pricing?
Performance-based pricing is a dynamic billing system where payment is directly tied to the achievement of specific, measurable outcomes. Unlike traditional models, this approach ensures that the provider’s compensation is contingent upon meeting pre-agreed performance metrics. These metrics can vary widely depending on the project and industry but often include targets such as increased sales, higher conversion rates, cost reductions, or lead generation. By focusing on tangible results, performance-based pricing aligns the interests of both the client and the IT partner, fostering a collaborative environment aimed at achieving the best possible outcomes.
Different billing system models with IT partners
Working with an IT partner can be based on different models, depending on the nature of the project, its scope and the needs of the organisation. A few of the more common billing methods used in the IT industry are:
- Time & materials model
- Fixed-price model
- Performance-based model
- Subscription or fixed monthly fee model
Time & materials model
In this model, you pay for the actual time spent by your IT partner on tasks. This model offers flexibility, but can lead to difficulties in predicting the total cost of a project, especially if the project is growing or changing in scope.
Fixed-price model
Here, remuneration is fixed based on a predetermined price for a service or product. This is the model that works best for projects with a well-defined scope and fixed requirements. However, in dynamic projects where changes may occur, its disadvantage becomes low flexibility.
Performance-based model
Here, the IT partner’s remuneration depends on the achievement of specific, measurable goals. In this model, clients can be assured that the investment in IT services will deliver concrete results. Performance-based models can include pay-per-click campaigns, where clients only pay for results such as leads generated from ad campaigns.
Subscription or fixed monthly fee model
In this case, the client pays a fixed fee for access to services for a set period of time. This is a model that works well for long-term customer relationships, providing predictability of costs and continuity of service.
Why do we choose a performance-based model?
We choose a performance-based model because it aligns the interests of both the client and the provider around measurable results. This model significantly reduces the financial risk for the client, as payment is only made for successful outcomes. It ensures that our team is highly motivated to achieve the best possible results, as our compensation is directly linked to our performance. This approach is not only flexible but also adaptable to various industries, making it a versatile solution for many businesses. By focusing on measurable success, we can better meet our clients’ needs and drive their business forward.
Benefits of Performance-Based Pricing
The benefits of performance-based pricing are manifold, making it an attractive option for many businesses:
- Alignment of Interests: This model ensures that both the buyer and seller are focused on achieving measurable results, fostering a collaborative and goal-oriented relationship.
- Reduced Financial Risk: Clients only pay for successful outcomes, which minimizes financial risk and ensures that their investment is well-spent.
- Motivation for Excellence: Providers are incentivized to deliver the best possible results, as their compensation is directly tied to their performance.
- Flexibility Across Industries: This pricing model is adaptable to various industries, making it a versatile solution for different business needs.
- Encouragement of Innovation: By focusing on outcomes, providers are encouraged to think creatively and innovate to achieve the desired results.
Why do we choose a performance-based model for cost savings?
As an IT partner, we rely on a performance-based model because it allows for full transparency and close cooperation with clients. Our remuneration is based on the achievement of specific, measurable goals, such as a reduction in Time-to-market (TTM), improved service quality or a reduction in production errors. As a result, clients can be confident that their investment in our services will have a measurable impact on the development of their business, and we are motivated to operate more efficiently. Many industries, including finance, healthcare, and e-commerce, have adopted performance-based models to accommodate their diverse needs and improve efficiency.
Such a model provides flexibility while keeping costs under control. Performance-based collaboration fosters a long-term relationship in which the client and IT partner pursue common goals. It is also a way to better adapt to changing market needs, resulting in higher competitiveness and lower operating costs for the client.
Choosing the right billing model requires understanding what factors affect the total cost of a project. To better understand what shapes the price of CMS implementations, please see the article “How much does a CMS implementation cost?What affects the price?”.
Importance of setting common goals
In organisations where teams have different areas of responsibility, it is crucial to set goals that unite all these groups and steer them in a common direction. In the case of large technology projects, where different departments are involved (from developers to the infrastructure department), harmonisation of goals can lead to clear benefits: shorter production cycles, better use of resources and faster time to market.
Setting common goals, such as reducing Time to Market (TTM), allows organisations to plan better and test new solutions faster. Reducing TTM means faster revenue generation, as the organisation can react faster to market changes and offer innovative products. This approach not only makes the company more competitive, but also leads to lower operating costs as the organisation operates more efficiently and faster, ultimately enhancing the client’s business outcomes.
Choosing the right IT partner
Selecting the right IT partner is crucial for the success of your projects. Here are some key factors to consider:
- Expertise: Look for a partner with extensive experience in your industry and with the specific technologies you need. Their expertise will ensure that they can provide the right tools and solutions for your business.
- Reputation: Research the partner’s reputation online and ask for references from previous clients. A well-regarded partner is more likely to deliver high-quality services.
- Communication: Ensure the partner has excellent communication skills and can work closely with your team. Effective communication is essential for successful collaboration and project execution.
- Flexibility: Choose a partner that can adapt to your business needs and provide ongoing support. Flexibility is key to addressing changing requirements and ensuring long-term success.
- Cost Savings: Consider a partner that offers cost-effective solutions and can help you reduce costs. This will ensure that you get the best value for your investment.
As a Microsoft Gold Partner, we have the expertise and experience to provide comprehensive IT solutions that meet your business needs. Our team works closely with clients to gain insight into their specific requirements and provide the right tools to achieve their goals. We offer a comprehensive suite of services, including IT consulting, software development, and ongoing support. Our goal is to help businesses like yours succeed in today’s fast-paced digital landscape.
Challenges in implementing and measuring target achievement
Introducing an accountability system based on the achievement of targets presents challenges, especially in large organisations. One problem is ensuring that targets are understood at all levels of the organisation and that the data used to measure them is accurate and reliable. A lack of integration of the systems where data is collected can make it difficult to analyse the data, resulting in poor decisions and increased operational costs. Integrating Active Directory is crucial for seamless data analysis, ensuring user synchronization and minimal disruption during transitions.
In order to effectively manage objectives and processes, organisations need to invest in tools that provide integration of data from different areas of the business. This makes it possible to react quickly to changes, eliminate risks associated with delays or errors, and optimise operations in real time.
Iterative process of goal setting and data measurement
Flexibility in setting targets is essential as the business environment is changing rapidly. Targets should be adjusted as new data becomes available and conditions change. A review cycle, where targets and metrics are regularly assessed and adjusted, allows organisations to keep their processes highly effective and better align with changing market requirements. The Microsoft Cloud can support this iterative process by providing robust tools for goal setting and data measurement.
Through this iterative approach, organisations can respond more quickly to changes in strategy, optimise the use of resources and ensure that activities are aligned with long-term goals. This approach reduces the risks associated with inadequate actions and ensures better use of available resources, resulting in greater profitability and lower costs.
Organisational culture and the impact of working with data
An organisational culture that promotes transparency, collaboration and flexibility is conducive to the effective implementation of goals and the achievement of results. Organisations that support open communication and prompt feedback are more motivated to achieve ambitious goals. This type of culture also fosters innovation, which is particularly important in the context of process management and the drive for efficiency improvements.
A flexible and open approach to data and its monitoring makes organisations more resilient to change and quicker to adapt their operations to changing market conditions. With this culture, purchasing processes become more transparent and decisions are made based on sound data, which minimises operational risk and allows for better supply chain management.
Summary
The use of data and goal-setting is the cornerstone of effective process management in organisations. By properly monitoring performance, organisations can optimise their operations, increase efficiency and improve the client’s business performance. Targets such as reducing TTM, shortening cycle time or automating testing allow for faster responses to change, lower operational costs and increased competitiveness. Transparency and flexibility in processes help build long-term, trusted relationships with IT partners, resulting in real savings and improved business performance
Author
Michal Lukawski
IT Client Partner
With over 16 years of experience in the IT industry, Michal Lukawski helps corporate clients create and develop digital products that address real business needs. He served as Managing Director of SYZYGY Warsaw and was part of the team responsible for transforming the organization into Turquoise. His approach combines understanding business needs with building lasting relationships based on transparency and shared accountability.
Among others, he is the author of:
How to effectively achieve business goals with complex IT environments?
Building a lasting relationship with an IT partner requires not only the right technologies, but also a shared understanding of priorities and measurable goals. Our team helps organizations develop a data-driven strategy, optimize processes, and deliver real results.
Contact us to:
- Discuss your organization’s challenges and goals,
- Learn about our approach to managing projects and working with teams,
- Learn how our services can support the development of your digital products and increase their business value.
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