CIO - Outcome-based outsourcing is the holy grail of IT services. Both customers and providers agree that if they can figure out a way to tie sourcing strategy to business results everyone will be happier in the end.
The problem with many traditional outsourcing arrangements is that they focus on input rather than output. Just as U.S. health care reform advocates criticize a system that incents doctors to perform tests and procedures with few rewards for the ultimate goal--a healthy patient, some outsourcing reformers say too many IT services deals are myopically focused on tasks or man-hours rather than business results.
Outcome-based contracts--at least, in theory--can change that. "Paying for outcomes is the idea of paying for success toward a desired result instead of paying for individual items like servers or programming hours," says Adam Strichman, an independent outsourcing consultant based in Mechanicsville, Va. "Nobody really wants servers, or switches or a mainframe. They generally want a business outcome, such as faster access to information or an automated delivery system."
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