Many industries are feeling margin pressure given the economic uncertainty and inflation, and the IT services industry is no exception. IT service providers (ITSPs) are therefore looking for margin expansion initiatives that offer the highest possible ROI.
Pricing should be at the very top of their list of initiatives. As McKinsey has written previously,1 pricing can be the most powerful value creation lever, given that a 1 percent price increase has more impact on bottom-line margins than a 1 percent uplift in volume or reduction in costs. While there has been industry-wide downward pressure on prices, ITSPs have real pockets of opportunity to increase their rates; our recent survey of industry chief information officers (CIOs) indicates that many are open to price negotiations for specialized services and niche skills—particularly in digital, data, and AI. ITSPs can optimize pricing through a four-part approach: the “set, get, keep” framework, which is then underpinned by core enablers.
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