Pricing Strategies for Information Technology Services: A Value-Based Approach

While commoditization is creating opportunities for customers of information technology services, it is creating new challenges for the service providers. Pricing strategies are one of the most important challenges and decisions for today's IT service providers. Pricing strategies for IT services have traditionally focused on covering costs, achieving desired margins and meeting the competition. These pricing schemes range from simple approaches, easily copied by competitors, to complex models with high management costs. In order to be successful in today's competitive business world, the service providers need to define their pricing strategies by considering the customer's perceived value from the service they receive rather than using traditional cost-based pricing strategies. This paper surveys literature on IT services pricing and presents a value-based approach to effectively price IT services.