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Nov 2016 - Industry Developments and Models - Doc # US41893316

Is the Time Right for Outcome-Based Business Models?

By: Marc StrohleinAdjunct Research Advisor, Leslie HandVice President, IDC Retail Insights, Amy Konary

Abstract

This IDC study explores pay-for-outcome or outcome-based business models, where sellers are compensated for their role in assisting their customers in achieving business impact or "outcomes," not for supplying products and services. The convergence of cloud, mobile, social, cognitive computing, big data/analytics, and IoT is providing a platform for a variety of outcome-based models, while factors such as a desire for more efficient and flexible ways of buying various products and services, global competition, and slow-growing economies and markets are providing the motivation. This study helps business and IT leaders understand pay-for-outcome models, why these models matter and how they are being used in different industries, and considerations in implementing such business models. This study answers the following three questions about outcome-based business models:

  • How are outcome-based business models different from traditional approaches?
  • Why should business and IT leaders consider PFO models, and how these models are being used?
  • What are the key considerations in implementing PFO agreements with customers?

"Moving from traditional to outcome-based models requires significant shifts in culture, operations, technologies, and financial models, so waiting until a major customer demands PFO or a competitor adopts the model can be fatal," says Marc Strohlein, adjunct research advisor with IDC's Research Network. "Any business whose products and services affect or drive its customers' business outcomes is fair game for PFO disruption."


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