Business Process Outsourcing has been one of the greatest corporate innovations that brought undeniable impacts on various industries. More and more organizations are starting to recognize its benefits to their businesses and how outsourcing certain tasks could bring them better leverage. Likewise, the global outsourcing market size is rapidly growing.
In addition to choosing a reputable service provider, companies should also be knowledgeable about other crucial factors that may affect the quality of an outsourced project. Because business owners invest time and money in it, choosing a pricing structure that best fits their business goals is very important.
As a BPO company that caters to various outsourcing solutions, we created this list of different outsourcing pricing models to consider before starting a deal with your service provider. This will serve as a guide to help you pick the model that works best for your operations. We also want you to learn how you can save money and other resources with the right model. Are you ready to discover what each pricing model provides? Keep reading.
What is a pricing model?
A pricing model refers to the method that is used by a company to determine how much each product or service should cost. As straightforward as its definition may sound, a pricing strategy is usually influenced by several factors such as service duration, product inclusions, expected outputs, and more.
Outsourcing companies provide different pricing models based on the needs of each client. More importantly, the chosen model must be agreed upon by both parties (outsourcing service provider and client) and must be fully disclosed in the outsourcing agreement. A pricing model is typically decided upon the culmination of an outsourcing contract. But experts have suggested more flexible pricing models that outsourcing providers can adopt.
With these models, pricing may be changed based on the complexity of the project outsourced and the demand for each product. Also, clients may upgrade to higher service levels, which is a win-win situation for both the vendor and the client.
Why is choosing the right outsourcing pricing model important?
As we mentioned earlier, companies invest time and money when outsourcing, regardless of its outcome or success rate. Thus, choosing the right type of outsourcing pricing model allows businesses to get what they pay for. Most companies worry about the hidden costs associated with every outsourcing project, but with the perfect pricing model, businesses can have a more transparent breakdown of all the services they paid for.
When a pricing model is not suitable for a specific company, there are many inevitable risks, which may include unstable quality of services, short-staffing, employee burnout, and problems in recruitment and hiring. Budget is also planned before every outsourcing arrangement, so it’s always advisable for business owners to choose the model that will fit not just the budget but, most importantly, the goals that the organization wants to achieve.
How can you choose the best outsourcing pricing model?
Choosing the appropriate pricing model might be one of the most crucial aspects of the outsourcing process. To know which model is the most suitable for your business, here are some important criteria to consider:
1. Size of Project and Lifecycle Phases
Picking an outsourcing pricing model involves determining the size of your project as well as every step necessary to complete it. For example, if the project involves building software starting from SDLC, tapping the help of third-party experts could be highly beneficial.
A creative illustration of SDLC.
You may choose to hire a specific outsourcing team for each phase (from planning to maintenance) to ensure that every stage will be facilitated by software experts. Note that a bigger team might also require a bigger budget.
2. Project Details, Requirements, and Scope
There are circumstances when project requirements and scope have to change. This may not be common for most outsourcing projects, as every client provides its outsourcing partner with detailed documentation and a list of requirements for a specific project.

If your choice of outsourcing pricing model particularly states additional fees for any modifications, consider selecting a model that’s more flexible.
3. Budget
Of course, every outsourcing project comes with different costs. After determining the objectives of a project based on your requirements. Budget planning is the next step. Knowing how outsourcing has become a reliable and incredibly popular business solution, more outsourcing firms are boasting competitive rates and a range of pricing for every service provided.

BPO rates typically include staffing and equipment/technology as standard features. Make sure to choose an outsourcing partner that delivers great quality and reasonable pricing. The best model will help you enjoy the benefits of outsourcing, so think thoroughly.
4. Level of Trust Between the Client & Service Provider
Is it your first time outsourcing? If not, entrusting long-term projects would be easier if you’ve got a proven business relationship with a service provider. If you’re a first-timer, holding back a little is definitely more practical. This means that choosing a pricing model that involves plenty of financial risks should be avoided.

You may also try outsourcing a small project first to test the capabilities of your potential service provider. The project could be paid for at a fixed price and should offer you a better vision of whether the BPO firm is the right partner for you. We don’t want you to waste time and resources, of course.
The 10 Best BPO Pricing Models for All Your Outsourcing Needs
Now that you’ve already learned the factors that you need to consider when choosing a pricing model, here are some of the top outsourcing pricing models that most BPO firms offer to their clients.
Note that not every model is ideal for all businesses, so it’s always best to research and discover which model works for your company. You’ll be surprised to know that you can actually choose a mixed-mode pricing model by combining different models. Continue reading to learn more.
1. Staffing Model
One of the most popular and commonly used pricing structures, this particular outsourcing model, involves hiring individuals or teams of professionals to work on specific tasks in a definite time period. This model is best for short-term projects and requires your outsourcing partner to take charge of finding, recruiting, and hiring staff. The service provider will also be responsible for acquiring and utilizing the right equipment for a specific project.
This is a popular outsourcing pricing model because it enables clients to scale their workforces up or down depending on the demand. Businesses can also have better access to industry experts and the best professionals, which are not available in-house. It’s also considered one of the most cost-effective pricing models because companies can just pay for the project staff instead of hiring full-time employees.
Its notable disadvantage is the integration of new project employees into an existing workflow or system. Since there is a time limit to this type of pricing model, finding the right people who will perfectly fit into the corporate culture of the client can be challenging. However, companies may send in-house staff to train and supervise the outsourced team to ensure that all project goals and standards are met.
2. Fixed Price Model
As the name suggests, this popular outsourcing pricing model offers a fixed price for a specific project based on the actual time and resources needed to complete it. This pricing model is ideal for small and short-term projects and is also recommended for those who are new to outsourcing.
While fixed-price models are highly favored by outsourcing clients, their nature brings a couple of disadvantages to BPO firms. Since the price of the project has been decided before it started, the service provider assumes all the potential risks. The lack of flexibility with this type of pricing model also holds businesses back from choosing this model.
Should there be updates and modifications in the scope, details, and requirements of the project, it’s always best for the client and its service provider to have a constant collaboration. Always remember that outsourcing is a partnership, and communication and transparency are crucial to maintaining a solid and valuable relationship among clients and BPO firms.
3. Time and Materials Model (T&M Model)
Alternatively known as the Cost & Materials model, the time and materials pricing model is among the most preferred pricing models by businesses for huge and long-term projects. T&M pricing is renowned for its flexibility as well as the involvement of a bidding process that enables businesses to select the perfect outsourcing service provider based on the project requirements. This means that a selection of BPO companies will present a proposal to a client, and the potential client will choose one that fits all its project needs.
Experts recommend this type for established companies that run large-scale projects and campaigns that are difficult to estimate in terms of time, requirements, and materials. The final cost of the project is computed after its completion, so this type of pricing model offers advantages to both parties.
Since this pricing model is based on the actual time and effort spent plus the cost of all materials used in the project, the client has the opportunity to make changes as the project progresses. Scalability is easier as well. Both parties may also agree to set payment rates on an hourly, daily, weekly, or monthly basis.
4. Cost-plus Pricing Model
Cost-plus pricing is a type of pricing model that gives the service provider an opportunity to make adjustments to consumable expenses and then add a fixed percentage to the profit. Fixed price models may look similar to cost-plus pricing, except the lather doesn’t require the service provider to set a standard rate for the project, regardless of the modifications and consumed expenses. Fee adjustments can be agreed upon by the vendor and the client based on the following conditions:
Cost Plus Fixed Fee (CPFF)
The client pays an additional fixed fee/amount upon the completion of a project.
Cost Plus Incentive (CPI)
In this condition, the client will only pay an incentive to the outsourcing provider if the provider exceeds the expected output and performance. Metrics are set by the client to assess and evaluate whether the service provider is eligible for incentives.
Cost Plus Award (CPA)
The client will pay its outsourcing partner solely based on its work performance. Unlike in CPI, there is no predetermined amount and metrics disclosed in the agreement. This means that the client can pay the service provider based on subjective standards.
5. Consumption-Based Pricing Model
Another practical choice, especially for cloud service providers, this type of outsourcing pricing model is based on the actual resources that an outsourcing company provides to its clients. To be more specific, clients are only expected to pay for the amount of resources consumed, which may include storage space, processing power, or network bandwidth.
Its primary benefit is flexibility and scalability, as the client can only pay based on the usage and consumption of each resource. Managing costs is a lot easier with this type of pricing model, but for large-scale projects, estimating the total costs may be challenging. This dilemma is commonly applicable to companies outsourcing call centers and other customer support services. The influx of calls and inquiries varies per month or season, so companies may find it more difficult to estimate the resources that the team needs.
Popular cloud services have a solution to this. OneDrive and Dropbox only charge customers for additional storage on a monthly basis. For call centers, a per-minute charge is set for clients that expect a low volume of calls each month.
6. Profit-Sharing Pricing Model
This particular model is ideal for businesses that want to take their outsourcing relationship to the next level. The profit-sharing pricing model is deeply rooted in the terms agreed upon and signed by the vendor and the client. As the name suggests, this pricing model allows a client to allocate a certain percentage of its profit to its service provider.
Others may not classify this as an independent pricing model because of its similarity to the Cost-Plus Outsourcing model. However, this model is considered a closer collaboration between the two parties, which means that the partnership may already involve risk mitigation and problem-solving together.
Nothing’s better than a partnership that’s mutually beneficial for the vendor and the client. In this pricing model, both parties assume the risks and rewards in a specific outsourcing project. Usually based on the combination of fixed fees and variable fees, which usually depend on the project’s success, it’s best for projects with higher risk and uncertainty levels.
Most companies that choose this pricing model offer bonus payments for exceptional outcomes, so the service provider and the outsourced team will be more motivated to excel. The shared risk-reward model is ideally combined with Fixed Price, Time & Materials, and Profit-Sharing models.
8. Incentive-Based Pricing Model
This is one of the three models which are tied to the Cost Plus pricing model where the client pays the outsourcing provider bonuses and commissions after an impressive achievement or milestone. The incentive-based model is a type of outsourcing pricing model that allows a service provider and a specific outsource team to receive incentives to motivate them to perform better at work.
Incentive-based outsourcing pricing model is highly recommended and incredibly beneficial for seasonal accounts and projects with extra services such as 24/7 support and after-office hours services. Most companies give incentives on a monthly basis for closed deals and with every quota exceeded. For example, a sales team can expect incentives after hitting beyond the quota of 10 closed and paid deals a month.
9. Performance-Based Pricing Model
Similar to the incentive-based model but with more specific metrics, this particular pricing model is best to ensure that all business objectives and targets are met. Simply put, a client will set metrics that will be used to measure and evaluate the performance of its outsourcing partner. These metrics may include website traffic, generated leads, customer satisfaction rates, and sales.
The performance-based pricing model is the best choice for projects with clearly defined expectations and outcomes, like digital marketing campaigns and lead generation efforts. With this kind of pricing model, the client expects to pay for the quality and quantity of the results, thus, the service provider should focus on ensuring that all resources are properly utilized and all tasks are delegated correctly.
10. Dedicated Team or FTE Model
Known for its similarity with the staffing model, the dedicated team model involves hiring third-party experts and industry professionals to work on a specific project or campaign. This model, however, is more suitable for long-term projects. Longer projects require frequent communication and a stable team to handle both the influx and downflow of each task. With the dedicated team model, clients can have better control of the outsourced operations while ensuring that the team works in alignment with the organization’s primary objectives.
This model also allows the client to oversee the recruitment of staff as well as the assignment of duties per employee. In this pricing model, the hired individuals are expected to perform tasks that match their skill sets to ensure smooth operations. The outsourced staff are often paid at a fixed rate and on a monthly basis.

Found the best pricing model for your business? Get in touch with Digital Minds BPO now.
Have you chosen the outsourcing pricing model that suits perfectly with your business? Outsourcing can be a challenging yet fun business decision that offers plenty of benefits that you can enjoy. By choosing the right service provider and the perfect pricing model for your needs and your budget, you’ll be surprised to discover how outsourcing can propel your company to impressive heights.
We at Digital Minds BPO offer the most reliable and affordable outsourcing solutions for companies who want to maximize productivity and efficiency. Equipped with the latest technology and the best team of industry professionals, we specialize in call center, content moderation, and data entry services. Digital Minds BPO has been one of the leading outsourcing providers in the Philippines, and we would be happy to help you take your business to the next level.
Contact us today, and let’s discuss how we can help you build your dreams!