skip to primary navigationskip to content

Cambridge Service Alliance

developing new understanding and approaches to complex service systems

Studying at Cambridge

 

Risks of Outcome-Based Service Contracts

last modified Feb 21, 2017 01:19 PM
February Paper on 'Investigating risks of outcome-based service contracts from a provider's perspective' by Jingchen Hou and Andy Neely

Investigating risks of outcome-based service contracts from a provider's perspective

Increasingly servitized companies use outcome-based contracts (OBCs) or performance-based contracts (PBCs) to provide advanced services such as availability or capability. These agreements often incorporate gain share and pain share mechanisms, and service providers are paid based on the outcomes of the total solutions or the outcomes of customer value in a continual use situation. However, the service providers of OBCs are concerned about the fact that there is usually a risk transfer from the customers to the providers, and more risks are introduced to the service providers. This research aims to unpack and analyse risks of OBCs from the providers’ perspective. In this paper, we differentiate commercial risk at the contract negotiation stage and operational risk at the contract implementation stage, and identify twenty-three risk factors that lead to commercial risk and / or operational risk in OBCs. These risk factors are then categorized in five dimensions and their contributions to commercial risk and operational risk are evaluated respectively. The five dimensions are complexity and dynamism regarding the context, and capability, alignment and dependency regarding the stakeholders. By proposing the risk framework of OBCs, this paper provides guidance for risk management for practitioners who use outcome-based contracts for the service provision.

RSS Feed Latest news

February 2019 Webinar - Business Ecosystems Mapping

Feb 12, 2019

In this webinar, Florian presents the Alliance January 2019 paper on Business Ecosystems Mapping.

January 2019 Paper

Jan 21, 2019

January 2019 paper on 'Using Business Ecosystems Mapping to Generate new Competitive Value Propositions'

Webinar 14 January

Jan 16, 2019

In this webinar, Tim Pearce discusses his paper on Bayesian Neural Network Ensembles

December 2018 Paper

Dec 19, 2018

December 2018 Paper on 'Bayesian Neural Network Ensembles'

Webinar 10 December 2018

Dec 14, 2018

Webinar on Service Business Model Innovation: The Digital Twin Technology by Veronica Martinez, Audrey Ouyang, Andy Neely, Caroline Burstall and Dav Bisessar

View all news

Upcoming events

Shift to Services Executive Education Programme

May 14, 2019

IfM, Cambridge, UK

Upcoming events