Composite Pricing Model for Hybrid IT Service Billing
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Solution Overview
Problem
Current pricing models for IT services lack flexibility and accuracy in addressing hybrid project characteristics, leading to suboptimal profit margins due to reliance on single pricing schemes rather than composite models that consider multiple factors.
Innovation Solution
A system and method for generating a composite pricing model that combines multiple elementary pricing models, optimizing for risk and profit by determining fractions of each model, computing charge fees, and allocating prices over time, using a combination of cost and value-based pricing.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If a single pricing model is used, then the pricing process is simple, but it cannot accurately address hybrid project characteristics and achieves suboptimal profit margins
Solution Approach 1:
The patent combines multiple elementary pricing models (cost-oriented, competitive-oriented, and value-based pricing) into a composite pricing model. This composite model integrates the strengths of each individual model to accurately price hybrid IT service projects while maintaining manageable complexity through systematic formulation and optimization.
Solution Approach 2:
The pricing model uses a composite structure analogous to composite materials, where different pricing approaches (cost-based, value-based, competitive-based) are combined in specific proportions to create a unified pricing framework that adapts to different project characteristics and achieves optimal profit margins.
2Reliability
If a composite pricing model is used, then profit margins are maximized, but the calculation and optimization process becomes complex
Solution Approach 1:
The patent transforms the complex composite pricing model into an optimized form by changing parameters - specifically formulating it as a linear programming problem with objective function and constraints. This parameter transformation enables efficient calculation and optimization while maintaining the ability to maximize profit margins through automated solving.
Solution Approach 2:
The patent replaces manual iterative calculation and optimization processes with an automated linear programming solution. This substitution of the calculation mechanism eliminates complex manual computations while achieving reliable profit margin optimization through mathematical programming solvers.
3Adaptability or versatility
If traditional pricing models are used, then the implementation is straightforward, but they lack flexibility in addressing diverse project characteristics
Solution Approach 1:
The patent segments the pricing model into distinct elementary components (cost-oriented, competitive-oriented, value-based pricing) that can be independently formulated and then combined. This segmentation allows the system to maintain flexibility for diverse project characteristics while simplifying implementation through modular, systematic construction of the composite model.
Data Source
AI summary
A method and system for generating bill payment schedule utilizes a composite pricing module to generate payment schedule over a predetermined period of time. In one aspect, a fraction of each pricing model attributing to the composite pricing model is determined. A charge fee associated with said each pricing model based on said fraction and said total price to charge is determined. Price to charge during each time unit of the time period is allocated, based on budget over the time period, discount rate, target profit margin and risk affordance. Bill schedule is generated using the allocated price.