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ISG White Paper

ESO Matures: Contracting and Pricing Models Evolve for Engineering Services

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by Jim Routzong

The Engineering Services Outsourcing (ESO) market has witnessed substantial growth in recent decades, and has evolved to encompass a broad range of new product development, value-engineering and engineering consulting functions. As the ESO market matures, new contracting vehicles and pricing models are emerging. Specifically, traditional project-focused contracts are being consolidated into longer-term arrangements with broader scope, enabling more strategic focus. In addition, staff augmentation is giving way to more sophisticated shared risk/reward models that are better suited to the increasing focus on added-value functions

This ISG white paper examines historical approaches to ESO outsourcing and their limitations in today’s growing market, and describes how clients and service providers are developing new models to better address evolving needs.