Interview results (Interviewees 6-10)

Conclusion 1

In unison, the interviewees confirm that economic growth, which refers to the growth of market share, revenue growth, and the maintenance of price levels and profitability, is the main managerial objective in the IT services sector. This objective influences the pricing for a specific customer situation as both, the customer requirements and the IT service provider’s financial profitability need to be consistent. Thereby, an appropriate pricing offer must be able to reflect flexibility in demand where necessary and preserve profitability at the same time.

Conclusion 2

The interviewees consider cost-plus as the predominant price-setting practice. If

information about customer expectations is available, target costing is the preferred price- setting practice. Both procedures are usually accompanied by benchmarking. All

interviewees see a connection between the grade of standardization of IT services, the grade of competition of the relevant IT services, and the way price-setting is performed. In their answers, the interviewees mainly attribute cost-plus to individual solution requests and target costing to standardized services. Likewise, they expect standardized IT services to be under higher competition than individual services and thereby confirm the correlation between the grade of competition and standardization.

Conclusion 3

The interviewees confirm the observation that customer value and premium pricing strategy are applied in situations of weaker competition whereas low-price supplier and parity pricing strategy are applied in situations of stronger competition. Some participants attribute the grade of competition to the type of service and its grade of standardization.

Conclusion 4

The conclusion on the reciprocal relationship between price-setting and price strategy with the grade of competition and the relationship quality between IT provider and customer as the main connecting factors is partly confirmed and not rejected. The interviewees argue that in case of weaker competition due to a less standardized service scope, the relationship is more intensive as non-standardized solutions require a closer cooperation. According to some interviewees, this does not necessarily mean that the relationship quality is better. The researcher interprets that despite a different formulation, the meaning of quality and intensity in this case is the same. Furthermore, the researcher prefers the use of the term relationship quality as it also implies the provision of information about the target price by the customer.

The interviewees confirm directly and indirectly the relation between price-setting and price strategy via connecting factors like the standardization of IT services and the

relationship quality. One interviewee describes the relationship as a triangle between price- setting, price strategy, and previously mentioned connecting factors that are all connected to each other. In unison, the interviewees state that a one-directional relationship that concludes price-setting from the applied price strategy was a one-sided consideration. They consider the interpretation as comprehensible that the application of price-setting practices and price strategies mutually depends on the competitive situation.

Conclusion 5

Without exception, the interviewees confirm that T&M, fixed price, and unit-based pricing are the most commonly applied pricing models in their practice. The fifth conclusion attributes the highest future potential to characteristics-based and parameter-based pricing models as they feature the critical success factors like transparency, flexibility, and

characteristics-based or parameter-based pricing models. However, the interview dialogues suggest that the pricing managers are not averse to the new pricing models. In unison, the interviewees agree that the transparency, flexibility, and predictability of pricing models are critical success factors.

Conclusion 6

The interviewees confirm that besides well-established processes, rebate and penalty elements can limit financial risks and measure quality. These elements convey a trust in the IT provider’s ability to perform. As in many existing contracts, SLAs must be formulated precisely. The stimulation of consumption through rebate and penalty elements in a pricing model can neither be confirmed nor denied by the research participants.

Conclusion 7

The feedbacks on the focus of the pricing manager’s role are not consistent. Some interviewees see only the internal focus of the pricing manager combined with sporadic customer contact regarding the clarification of pricing models, settlement problems, or tax issues. Others say that pricing managers have both internal and external responsibilities, and that the role’s duties depend on the pricing manager’s personality and expertise. The researcher notes that the area of responsibility tends to be extended to customer-oriented activities.

Likewise, the pricing manager’s responsibilities are rated differently. Some limit the responsibilities to the determination of prices and the projection of profitability. Others see additional customer-oriented activities such as pricing model discussions and price

negotiations as the responsibility of the pricing manager. All participants rate the role as very critical due to the far-reaching financial implications of pricing.

Conclusion 8

In unison, the interviewees confirm the criticality of a standard service catalogue for IT services. It is expected to make the pricing process easier, quicker, less error-prone, and more resource-efficient. If anything, only fragments of a service catalogue are available for standard elements such as servers, storage, and connectivity services. There is certainly the tension between delivery and sales, which on the one hand set the cost base and on the other hand the price level of the market as different points of reference. Furthermore, the

mutual acceptance in international companies is difficult due to regional peculiarities. In the end, a service catalogue cannot cover all elements of service, because the customer demand can differ in many details. However, the recommendation to implement a standard service catalogue for IT services is undisputed.

Conclusion 9

The verification interviews indicate that customer-specific requirements in the age of standardization are and will be persistent. Specific requirements are at first sight not always obvious, but every demand has its unique details. The interviewees estimate that about 80% of provided IT services are standardized. On the one hand, this assumption emphasizes the need for a service catalogue and, on the other hand, it underlines the importance of flexibility of pricing models.

Conclusion 10

The last conclusion recommends the establishment of application criteria of convenient pricing models according to the customer situation. The considered application criteria are e.g., predictability, transparency, flexibility, comprehensibility, cost decrease potential, correlation with cost drivers, and risk diversification potential. Some interviewees have concerns regarding the too extensive and expensive implementation and prefer other process optimization activities. Others see these concerns but consider the application criteria of pricing models as equally important in comparison with other pricing process improvements. However, all interviewees support this recommendation with varying emphasis on the relevant application criteria. All in all, the interviewees see the modified conceptual framework and the management recommendations as very useful for their pricing practice and expect to see further benefits from implementing the recommendations made across the organization.

4.7.3 Conclusion

The conclusion verification through the second sequence of five interviews of research participants 6-10 (see Table 6) supports the conclusions from the main interviews and the cognitive mapping process in section 4.6. The interviewees confirm that economic growth is the main managerial objective that influences the pricing process. They also confirm cost-plus and target pricing as the predominant price-setting practices. The reciprocal

relationship between price-setting and price strategy with the grade of competition and the relationship quality between IT provider and customer as the main connecting factors is partly confirmed and not rejected. The researcher sees this as approval since the

connection is not obvious at first glance. In unison, conclusions regarding pricing models and penalty and rebate elements are supported. In addition, the interviewees emphasize the importance of the pricing manager’s role, although the focus of the role and the associated internal and external tasks are seen differently. Recommendations regarding the service catalogue and application criteria for pricing models are considered very valuable. All interviewees believe that the modified conceptual framework correlates with all price- setting and price strategy elements and draws the right conclusions. The provided recommendations are considered as very useful for pricing practice.

All in all, the feedbacks of the verification interviews provide a more detailed

understanding and a diversified picture of the conclusions made. A revision of the main conclusions summarized in section 4.6 is not considered necessary.

5 Discussion and conclusion

The previous findings chapter discusses, interprets, and verifies findings, correlates these conclusions to the existing research, and illustrates their implications for the conceptual framework. Thereby, positive correlations with the existing research indicate academic relevance, provide supporting evidence, and illuminate the reality, whereas negative

correlations outline the explorative research character and the novelty of this research. This last chapter is based on these conclusions and correlations, and it has the following tasks:

1. Conclusions are related to the research questions concerning price-setting practices, price strategies, and their reciprocal dependencies (5.1.1), critical success factors (5.1.2), and pricing process improvements (5.1.3).

2. Theoretical contribution is made by discussing research correlations and their conceptual significance for future pricing research (5.2.1), implementing inferred implications to a revised conceptual framework (5.2.2), and discussing limitations that arise in the realization of this research (5.2.3).

3. Practical contribution is made by concluding recommendations concerning the role of the pricing manager (5.3.1.1), the standardization of the IT service catalogue (5.3.1.2), and a paradigm change in price-setting (5.3.1.3). Further practical contribution is made by suggesting a new and unique categorization of pricing models applied to IT services; this four-category pricing model toolbox results from the identified critical success factors and conclusions drawn (5.3.2).

4. The research résumé discusses the achievement of the self-imposed research goals (5.4.1), highlights the novelty of this research (5.4.2), and reflects on the alternative methodological research approaches and the transferability of this research

approach to other industries (5.4.3).