If it proves to be impossible to identify a sufficient number of peers from the country where the service will be delivered – not the country where the service will be per­formed – peers from other countries must be included in the process. But care should be taken here to ensure that the countries are comparable from the perspec­tive of the IT service market, e.g., only countries from the euro zone, because other­wise the benchmark results can be distorted due to factors going even beyond the translation of currencies.

Normalization and setting prices

As part of the framework conditions of the benchmark, the definition of the individual market price agreed between service provider and customer must be clarified. From a mathematical standpoint, this is a simple question, but from the business perspec­tive it is anything but insignificant. In the ideal case, the customer’s IT sourcing strat­egy or the service provider’s positioning will be of help because every customer-ser­vice provider relationship is characterized by a number of aspects. They include such factors as price, quality, flexibility, and innovation. But the individual aspects cannot be considered in isolation because, just as one example, price leadership and quality leadership aim in different directions. So the differing objectives must be carefully weighed against one another. Goals which are too ambitious can later turn into problems for everyone involved despite the best of intentions.

Figure 2 shows a selection of possible market price definitions. Besides the obvious candidates for the market price such as mean value, median, first and second quar­tiles, individual definitions will be found in many cases. They include the mean be­tween the minimum and first quartile (midpoint of best quartile, MPBQ) and the mean between the first and second quartiles (midpoint of second quartile, MPSQ). From a methodological standpoint, it is sensible to position the market price within the vicinity of the mean or median. The farther away you move in the direction of the minimum or first quarter, the more likely the chance of outliers.

Another important aspect related to the determination of the procedure for setting prices is found in the problem of “best company” versus “best product”. If the “best product” principle is followed, the price is set according to the selected procedure for every single service. Using the “best company” principle, in contrast, means deter­mining the price across all of the services. The “best company” principle is closer to reality because a certain variance must be expected across the service portfolio of any service provider. But the “best product” principle is frequently taken as a basis because its application is less demanding on the benchmark provider.