Exploring the Impact of Fit between Context Factors and Pricing Model Choice on the Success of IT Outsourcing Mega-Deals

The interplay between internal and external contextual factors and pricing model choice in IT outsourcing (ITO) contracts is still an under-researched area in the ITO literature. However, as past and current examples of outsourcing failures indicate, an informed selection of an adequate pricing model indeed plays a crucial, if not decisive role to ensure a successful deal outcome and to mitigate risks in the wake of the deal. Based on contingency theory, the paper at hand explores 60 ITO megadeals (> EUR 50 million) for the impact of the alignment of business objectives and market factors with pricing model choice on ITO deal performance. Our empirical results, which were based on a fitas-gestalts conceptualization, suggest that a high congruence of business objectives and market characteristics with pricing model attributes in ITO contracts engender better cost control and service results and a higher level of satisfaction after ITO deals than a low congruence of these factors. Our findings offer several interesting implications that can be used to improve pricing configurations in ITO deal contracts.