as banking, tax authorities, and health care.

Customers also have to limit the

as available in the existing versions and have to continuously change whne
versions are released by the IT Service provider
30
IT Services Business Management: Concepts, Processes and Practices
he new
conoru
be element of risk and reward sharing based on the outcome of the sermay
For example, in the case of business process services and outbound calling servic
payment is made based on the success rate of the call or culmination of end-c
requirements. Recently BM entered a revenue sharing services contract for
Bharti Ainel's entire IT operations. Such contracts require to be drafted v
and executed with great finesse, else t may end up with lot of risk for both I'T
provider as well as the client who gets into such contract.
(vi) Risk and reward sharing: In certain large and complex services contract the
sourcing
very careful
ervices
the services also called Software as Services (SaaS). In this model instead of
develonin
customized development a standard software product can be developed by the
Services product and sold in large quantity. Incremental costs of selling more co
the product are negligible, leading to extremely high profit margin. Companies such
Microsoft. IBM. Adobe, ERP products, anti-virus software, point solutions etc. are
examples. Yet this is not an easy business model as t requires lot or initial
invest
to work on the product idea and then in its marketing. Lot of efforts for marketin
brand building will be required before the first copy is sold. It will also require
regula
upgrade and enhancement in the product feature to ap
In addition to it, challenge of meeting competition remai
executing this business model.
(vii) Services as product: I is reverse of servitijing a product used in the pay as
yo
copies o
grea
peal large numbers of user
ns greatest in successfull
In order to understand what are the cost clements and what how it is related with
revenue
and profit Table 3.1 has been created as a quick summary
Table 31 A general appreciation of financial terms for an IT Services firm
Typical
range (in %)
Item
Description
Remarks
Revenue
The amount charged from
customer for providing
ServiceS
It may include revenue or
labour-based services, sale
of intellectua asset e
software censes pay a
you use services, on line
advertisement on websites
Also any risk and reward i
also counted in revenuc
Pricc
Charge of the services per
It may vary depending upr
unit based on the prevailingper uni
market conditions
the customer, size o
f contral
and type of service. One
of the critical activity a
ecision point also dicad
by market conditions as
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