On pricing complex IT service solutions

Abstract

We present a case management approach to determining the upper and lower bounds on the price at which complex IT service contracts can be won or lost. Our approach is based on mining 'similar' prior deals and market benchmark data modeled as cases, to determine the upper and lower bounds on unit costs and unit prices for each of the service involved in an IT service solution such that the win probability of the deal is maximized. While there is no such a thing as an exact match in complex IT service solutions, as no two deals are alike, our approach offers a practical method for assessing the competitiveness of IT service solutions from unit cost and unit price perspective by leveraging prior won and lost deals. Experiments done on about 177 prior IT strategic outsourcing deals of a large IT service provider organization have resulted in a precision of 72% in determining the price at which one must not lose a deal under ceteris paribus assumption. Another main outcome of our study is the reconfirmation of the belief that price is a weak indicator of win or loss outcome in complex IT services where multiple factors are at play in clients' decision to award contracts. © 2014 IEEE.