Microsoft’s AI-First Partner Transformation Playbook, includes a statistic that should make every partner leader pause: 

70% of customers are already interested in moving away from fixed-price and time-and-materials models.

This is not at some point in the future. It’s now! Those are existing customers, on existing engagements, already looking for something different.

Most partners read that, acknowledge it, and then return to building their next T&M (Time & Materials) based proposal.

This is the conversation the industry continues to delay, and it’s time to address it directly.

Why T&M made sense, and why it no longer does

Time-and-materials pricing was rational. It reflected genuine uncertainty about the project scope, shifted delivery risk to the customer, and rewarded the partner for the one thing that was genuinely scarce: experienced consulting time.

The model worked because consultant hours were the constraint. More output required more people. That is no longer true.

Smaller, more highly capable teams, supported by the right frameworks and tooling, can now deliver what once required significantly larger teams.

The constraint has moved from people to capability, judgment, and IP.

When this shift happens, pricing tied to hours becomes more than inefficient; it becomes misaligned with how value is actually created.

Customers have recognised this. That is what the 70% is telling you.

What outcome-based pricing actually means

There is a lot of loose language around ‘outcome-based’ models, so it is worth being specific.

Outcome-based pricing means the commercial terms are anchored to measurable business results rather than activities. It might mean a recurring fee tied to the utilisation of an agentic solution. It might mean a gain-share arrangement where both parties benefit from productivity improvements. It might mean a subscription-based model for agent-managed services, where the partner assumes operational accountability post-deployment.

What it does not mean is wrapping a T&M engagement in outcome language and calling it transformation.

True outcome-based pricing requires:

1. Predictable delivery economics
2. Credible, measurable KPI’s tied to value delivered.

Without those, it is not a new model; it is a rebrand.

Why human plus agent delivery changes the calculation

The reason outcome-based pricing was too risky for most partners until recently is that delivery cost variability was too high. If a project runs over, the partner erodes the margin. With traditional delivery, that risk is substantial.

Human plus agent delivery changes this.

When agents handle the repeatable, analytical, and data-intensive elements of a project, and human consultants focus on governance, judgment, and high-value intervention, delivery becomes:

• Faster
• More consistent
• More predictable

That predictability is the critical enabler.

You can price based on outcomes when you have confidence in your cost to deliver them.

Partners who have standardised their delivery with the right playbooks, templates, and agent-ready frameworks are already operating this way. Those who have not are still pricing uncertainty into every engagement, which is why their proposals keep losing to those who have made the shift.

The real reason the shift is not happening faster

It is not about capability. Most partners understand the direction. It is not even a willingness in principle. Ask any partner leader whether outcome-based models are the future, and they will agree immediately.

The reason is margin protection in the current year. T&M has known economics.

Moving to a new pricing model requires investment in new commercial constructs, new measurement frameworks, new delivery tooling, and new conversations with customers that may slow near-term deal velocity. The incentive to delay is real.

The problem is that delay compounds the risk rather than reducing it. Every quarter spent running T&M motions while customers are asking for something different is a quarter where a competitor is building the commercial capability you are deferring.

The compression in traditional services revenues that Microsoft and McKinsey are projecting is not contingent on partners changing their model. It happens regardless. The question is whether you have built a new model to replace what is being compressed.

What you need to make this work

Pricing on outcomes is not a sales conversation. It is an operational capability. You need delivery cost visibility at a granular level. You need to collect and use data that shows how your agents’ actions affect your business KPIs. You need contract templates that clearly define outcomes, measurement periods, and adjustment mechanisms. You need a portfolio of reusable IP so that each engagement does not start from zero.

None of this is impossible. But none of it happens by accident, and it does not happen while your best people are fully utilised on T&M projects.

The uncomfortable truth

Partners who are waiting for the right moment to address the commercial model are not being cautious. They are just deciding which year to have the harder conversation.

The partners making the shift now are not braver. They have simply accepted that the conversation is unavoidable, and they would rather have it from a position of preparation rather than of necessity.

70% of your customers are already thinking about it. The question is whether you will lead that conversation or be forced into it.

This is the latest in a series of articles exploring the practical implications of Microsoft’s AI-First Partner Transformation Playbook for Dynamics 365 partners.