IT bellwether Infosys is making a major shift in the way it bills its clients. The company is gradually shifting from the employee-linked pricing model, in which the billing often takes place on the basis of time and material, to an outcome-based model, where the work done determines the rates.
Infosys Chief Executive Officer Kris Gopalakrishnan told Hindustan Times that this formed a long-term goal for the company. The change that is expected to boost profit margins is also in sync with the changed market dynamics, where clients are keen to link expenses to real business outcome.
The outcome-based model increases productivity without increasing the headcount. It boosts revenue per employee as margins rise from 25-35 per cent as against 10-15 per cent for the fixed pricing models.
“At present outcome-based pricing model accounts for less than 5 per cent of our revenues, but we are eyeing a one third revenue from this model over the next few years,” Gopalkrishnan said.
“This is the preferred model that is beneficial to the clients as it offers variability, flexibility and less complicated. We already have clients in HR and social infrastructure management verticals, who are billed according to this model.”
Gopalkrishnan also said that the new pricing model will not lead to jobs losses. “Though this is the most preferred model, we have not cut down on our hiring plans. In fact, we stick to our plans to make fresh 15,000 campus offers.”