Transaction Based Pricing System Using Complexity Scores
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Solution Overview
Problem
Outsourcing organizations face challenges in estimating efforts and determining transaction-based pricing due to varying operating conditions, lack of structured methods, and flexibility in defining and configuring transactions, leading to unoptimized team strength and pricing inefficiencies.
Innovation Solution
A system and method for transaction-based pricing that defines transactions with sub-processes, assigns complexity scores, and calculates processing time based on historical data, allowing clients to select sub-processes and units, and determines pricing based on estimated efforts, enabling flexible and optimized pricing.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Measurement precision
If transaction based pricing model is used, then client pays for actual work performed, but complexity of deciding apt price increases
Solution Approach 1:
The patent transforms the pricing decision from a complex qualitative judgment into a structured quantitative calculation by introducing parameters such as effort units, complexity scores, and processing time. The pricing is determined by changing the state of the pricing mechanism from subjective negotiation to objective formula-based calculation, thereby reducing decision complexity while maintaining precision.
Solution Approach 2:
The patent introduces an intermediary pricing calculation system that mediates between the client's need for accurate pricing and the vendor's need for fair compensation. This intermediary system uses standardized metrics and formulas to automatically determine prices, eliminating the need for complex manual negotiations and decisions while ensuring both parties' interests are met.
2Measurement precision
If effort estimation is performed for each transaction, then pricing can be accurately determined, but time and resources for estimation increase
Solution Approach 1:
The patent applies preliminary action by pre-defining complexity scores, effort unit standards, and processing time benchmarks for different types of transactions before actual pricing occurs. This allows the system to quickly reference and apply predetermined values rather than performing detailed estimations for each transaction, significantly reducing estimation time while maintaining accuracy through the structured framework.
Solution Approach 2:
The patent segments the effort estimation process into discrete, standardized components such as complexity scores, effort units, and processing time metrics. By breaking down the estimation into these manageable segments with predefined values, the system can efficiently calculate total effort without requiring comprehensive analysis of each transaction, thereby reducing time investment while preserving estimation accuracy.
3Productivity
If structured method for pricing is implemented, then pricing efficiency improves, but flexibility in defining transactions decreases
Solution Approach 1:
The patent implements dynamics by making the structured pricing method adaptable to different transaction types through configurable parameters. The system allows customization of complexity scores, effort units, and processing time based on specific transaction characteristics, enabling the same structured framework to efficiently handle diverse transactions without sacrificing flexibility. The structure itself can dynamically adjust to accommodate varying transaction definitions.
Data Source
AI summary
System and method for transaction based pricing are described. The method comprises defining one or more transactions which include at least one sub-process. Further, units per transaction for each of the at least one sub-process is identified based on requirement data. Thereafter, a process complexity is assigned to the each of the at least one sub-process based on a complexity score computed for the each of the at least one sub-process. Further, a processing time is obtained for the each of the at least one sub-process based on the process complexity assigned to the each of the at least one sub-process. Further, estimated efforts for performing the one or more transactions are ascertained based on the processing time obtained for the each of the at least one sub-process. Furthermore, pricing for each of the one or more transactions is identified based on the estimated efforts.