The Hindu : Business : HCL Tech rejigs pricing strategy

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Friday, Jul 29, 2005

Business

Business

HCL Tech rejigs pricing strategy

Special Correspondent

To move towards value-centric leadership

CHENNAI: In a bid to provide more comfort to clients who come under increasing pressure on margins due to assorted reasons, IT solution provider HCL Technologies has re-jigged its pricing strategy.

The company is moving towards an output-based pricing from an effort-based one. In an effort-based model, the price is typically fixed based on man hours employed. In an output-based pricing, there is a transaction-based sharing agreement with clients.

In an interaction with select presspersons, Vineet Nayar, President, said HCL Technologies had already begun shifting to output-based pricing. "We are doing it with Fortune 500 companies,'' he added.

At present, little less than ten clients had gone in for this pricing model, he pointed out. Out of the revenue $750 million, around $100 million had come from the output-based pricing model, he said.

With mega contracts coming up for renegotiations in Europe at a time when margins were under intense pressure, Mr. Nayar was confident that the `Blue Ocean' strategy (where you create uncontested markets) adopted by HCL Technologies would pay.

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