IT co customers seek ‘flexi over fixed’

Bengaluru:

Many customers of Indian IT firms are placing demands that go beyond the commercial construct of a fixed price project, a form of services contract where the company takes the responsibility for delivering a solution for a certain price and within a mutually agreed time-frame.


The arrangement is meant to give vendors flexibility in the staffing and execution of the project. But IT firms are battling what is called a “pseudo FP (fixed price)”, an industry parlance for customers controlling staffing requirements, including selecting campus recruits, keeping tabs on the operations and controlling the entire experience.

Though Indian IT companies don’t record a metric like “pseudo FP”, a large part of the FP contracts are said to be pseudo FP. Before FP contracts became popular, the standard contract was what is called a time and materials contract, where customers paid for the time spent by the IT vendor’s employees and the materials used by the vendor. In that model, customers exercised control over the employees they got.

On “pseudo FP” contracts, Capgemini COO Thierry Delaporte said: “There is a lot of different models that exist across the organisation, spanning industries and from one market to another. In America it is probably a little more towards time and material. In Europe probably towards more fixed price. Sometimes the client likes to control things. Sometimes he likes to limit his risk or push his risk to someone else. You cannot have both. You cannot have at the same time full control on everything and push responsibility to someone else.”

Akhilesh Tuteja, global cyber security practice co-leader and heads of the IT advisory practice for KPMG in India, said, “A lot of contracts are outcome based and many clients expect a high degree of visibility into their delivery structure, skills and scale of people. It creates a risk management lever too,” he said.

Hansa Iyengar, analyst in London-based Ovum Research, said: “Customers do have a say in who the vendor hires and this is specifically prominent in roles such as architects, team leads, project managers, agile coaches, etc, as these roles have a direct impact on the delivery quality.”