Speaking to Outsourcing-Pharma.com, the strategic outsourcing firm’s associate VP Roy Devine said its “pay for results only” model could drive the industry because it removes the risk that CROs (contract rsearch organisations) could fail to meet, or could renege on promises.
He said it places the emphasis back on the business goals of both the customer and the vendor, because if targets are not met, full pay is not given.
“The model implies that clients pay for the business value the outsourcer creates, rather than the time and materials spent on a project,” he told us.
“Historically, customers would take the chance their investments would generate positive business outcomes. Today, these same customers can invest with more assurance since the model ensures a vendor is singularly focused on a specific outcome.”
And though iGate has utilised the model solely for IT based solutions at present, the firm believes outcome-based work “proves itself a logical next step for the industry” as a whole.
Viable for providers?
When asked why he believes CROs would be willing to take what is seemingly more risk on board, and whether this could make the service industry more unstable, Devine told us the opposite is true.
He said the model changes the relationship from a vendor to a partner, and that “partners will make money together, not off of each other like in a conventional vendor client relationship.
“It actually places the CRO in a position to drive the relationship in a manner that produces positive outcomes. Rather than settle for procedures that aren't working, the CRO now has an incentive to work in concert with the customer because it shares in both the risk and the reward.”
He added the CROs unable to match their original promises would be weeded out by the model.
“Vendors that don't change their business models to become more customer-focused will have to find ways to defend the effectiveness of the old paradigm,” he added.
He said that some other companies have already started to pick up on the value of the model, and are pondering similar programs.
Devine said: “The outcome-based model in outsourcing might seem novel now, but it will be undoubtedly be regarded as ‘the norm’ in years to come.”