The Critical Role of Pricing in IT Services

Pricing is one of the most direct and powerful levers for profit improvement, yet it is often underused or poorly managed in IT services firms. In a sector where delivery is complex, margins are tight, competition is intense and client expectations are rising, pricing must be treated as a strategic capability.

IT services firms are typically caught between commoditised cost pressure and the need to monetise differentiated and high-value offerings. How can firms shift from reactive pricing to a model that protects margins, reflects value and drives sustainable growth?

Unique Challenges of Pricing in IT Services

There are a range of contextual factors that, when taken together, make pricing within IT services a unique challenge. These include:

Common Pitfalls

In the face of such challenges, there are a range of pitfalls which we regularly see and are critical for businesses to look out for:

Over-reliance on cost-plus pricing or time and materials: Whilst easy to administer, such an approach caps value capture and makes it hard to bake in a “premium”.
Absence of pricing tiers or structured offerings: Despite everything being custom, IT services are often priced as if they were standard.
Poor articulation of value: Where firms fail to communicate outcomes or impact, clients default to comparing day rates and pursuing the lowest price.
Flat rate cards across clients, sectors, regions and solutions: Flat rate cards result in an absence of differentiated pricing, despite differences in willingness to pay and price sensitivity.
Discounting culture: The use of widespread discounting, driven by ineffective sales incentives, that prioritise closing deals rather than protecting margins, end-of-quarter pressure or lack of deal governance.
Training and enablement: A lack of training or enablement for sales teams to articulate value or defend price in negotiations, such as having ready sales scripts.
Underinvestment in pricing roles and processes: Many firms lack pricing specialists in a structured pricing process, pricing governance and central oversight, monitoring/tracking or clear escalation rules.
10 Ways to Translate Pricing Theory into Consistent Execution
- Segment clients and reflect willingness to pay: Not all customers value the same things, and as a result they shouldn’t be priced the same. Enterprise buyers, mid-market firms and public-sector clients differ in needs, willingness to pay and procurement rigour, so pricing structures, thresholds and models should be tailored accordingly. For example, enterprise clients may be charged a higher base rate with volume discounts and periodic adjustments based on actual usage, while smaller clients might be offered a simple flat monthly fee with predefined limits to keep the total bill predictable and affordable.
- Differentiate by service type: Pricing must reflect the service’s position on the commoditised-differentiated spectrum. For example, applying a cost-plus approach for commoditised infrastructure, a value-based one for strategy or advisory, and a subscription or fixed-fee model for managed services. This allows margins to reflect the value delivered — not just the effort expended.
- Provide flexible commercial models: Equip teams with a commercial toolkit — covering time and materials, milestone-based pricing, gain share and fixed-fee options — to align with the variety of client preferences and risk profiles.
- Productise and tier the offer: Structure offerings into clear packages with feature-based tiers. This helps guide clients towards higher-value configurations while making pricing more transparent and understandable. Price bundles, rather than line items, help simplify buying decisions and reduce scrutiny whilst helping build in a premium.
- Price for complexity and scope: Introduce complexity multipliers for factors such as urgency, global delivery or mission-critical scope. These should be built into standard templates or explained transparently as appropriate. By using relevant guardrails in contracts, price change requests and enforcing scope boundaries can be managed more effectively.
- Use behavioural science: Leverage anchors and thresholds to shape perception, such as avoiding price cliffs, like £200 per day compared to £199 per day. Provide clear pricing menus with options but remember to guide clients through the various configurations.
- Unbundle add-ons and monetise value: Identify and charge for value-added elements that are often given away for free and can go unseen by the client, such as tooling access, enhanced reporting or account management. Be explicit about what’s included versus what is optional.
- Build governance and discipline: Establish deal reviews for nonstandard pricing, especially where risk or margin thresholds are breached. Ensure pricing is governed centrally but is actionable by frontline teams with clear escalation paths. Be very rigorous about managing discounts to prevent value erosion.
- Equip the front line: Support sales with enablement tools, including objection-handling scripts, pricing playbooks and value articulation templates. Pricing is only as effective as the sales team’s ability to articulate and defend it.
- Make pricing a capability, not a project: Sustained pricing excellence requires more than one-off initiatives; it must be embedded into the firm’s operating model, tools and behaviours.

Pricing in Action

SoftServe, a digital engineering firm offering cloud, analytics and software transformation services globally, used to offer time-and-material or cost-plus consulting for cloud optimisation and solutions. They have since introduced a new model around value-based pricing, tied to AWS cost savings, with fees instead linked to achieved reductions in customer AWS spend.¹

Globant, an international AI and software development company, traditionally offered hours-based consulting and project-based pricing. They now provide an innovative “AI Pods” concept — monthly access to a team augmented by AI and priced on token usage.²

Virtus Data Centres is a UK-based company that develops and operates data centres. By using modular and scalable pricing, customers pay based on space, power and network usage rather than a fixed fee — allowing for pay-as-you-grow alignment. These flexible contracts allow customers to scale power density from 4 kW to 40 kW per rack and adjust contractual terms as needs evolve, with the aim to incentivise multiyear commitments.³

Aruba, a wide-ranging Italian tech company, is a compelling example for modern cloud and infrastructure pricing. Aruba adopts a hybrid pricing model tailored to each service category, blending flat-rate packages, tiered plans and granular pay-per-use options. VPS and hosting plans follow promotional monthly rates, while services like object storage, backup and application monitoring offer flexible hourly billing. This approach balances affordability for SMEs with scalability for enterprise and cloud-native workloads.⁴

Building Pricing as a Capability

To ensure long-term success in pricing, successful IT services firms continually build pricing capabilities into the new “business as usual” through a variety of actions.

Establish a dedicated pricing function or embed pricing experts into commercial and finance teams.
Define the pricing governance structure: Determine who can approve what, the escalation paths and the deal review thresholds, as well as ensure compliance with this.
Invest in sales enablement: Develop pricing playbooks, objection-handling tools and value story templates.
Build pricing tools that make it easy to price consistently, such as configure, price, quote systems, calculators and pricing dashboards.
Develop analytics capabilities and establish an ongoing improvement loop. Conduct win-loss reviews, discounting analyses, A/B testing and margin variance tracking, embedding them into regular reporting.
Make pricing a top management agenda point. Review pricing performance monthly or quarterly as part of commercial performance management.

A Call to Action

Pricing excellence in IT services is no longer optional — margin pressure, client expectations and market competition demand it. The difference between average and best-in-class firms is often a function of pricing maturity, not just technical capability.

The tech race shows no signs of slowing. The speed at which change occurs in the industry means that IT services firms can go from growth to stress in a flash. In such a fast-moving and turbulent sector, understanding the pressures and strategies for resilience is critical. For more insights into how key stakeholders, from investors to lenders, can avoid distress, manage exposures and protect value, explore our series on the challenges and solutions shaping the IT services landscape.

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