Evaluating IT Services Price Benchmarks under Uncertainty

IT services prices change as technology and business processes evolve and competition intensifies. To ensure price-competitive IT services over the life of the contract, client firms often rely on price benchmarks, whereby a third-party assesses the prevailing market price for the service. We provide a model to inform firms on the optimal timing and valuation of price benchmarks and assess the value of market price information for IT services. We find that IT service-level agreement (SLA) price benchmarks are most valuable for long-term contracts with significant price drift. We find that IT services price transparency is valuable where there is uncertainty about the price drift of IT services. We provide managerial recommendations based on our model for IT service price benchmarks.