Article Contents
Article Contents

# Effect of service quality on software sales and coordination mechanism in IT service supply chain

• *Corresponding author: Tinghai Ren
• Currently, the upstream software developer usually cooperates with the downstream service provider to sell software and related services to client enterprises. Furthermore, the quality of pre-sale services provided by the provider has significant impact on software sales and on the performance of IT service supply chain (ITSSC). However, the existing research on IT service supply chain management (ITSSCM) lacks attention to this issue. In this study, we consider an ITSSC with a software developer, a service provider and client enterprises. Two scenarios are discussed in this study. Our study finds that the quality of pre-sale services provided by the provider and the price of extended warranty service (EWS) provided by the developer (in centralized decision-making (CDM)) are both higher than those in decentralized decision-making (DDM); when the sensitivity of clients to the software price is lower than a certain critical value, the software sales price (in CDM) is unexpectedly higher than that in DDM; however, when it is higher than the certain value, the software sales price (in CDM) is lower than that in DDM. Due to the double marginal effect between the developer and the provider, the total profit of ITSSC (in DDM) is always lower than that in CDM. By providing a combined coordination contract based on "guiding price $+$ service cost sharing $+$ product revenue sharing", not only the total profit of ITSSC can be increased, but also the profit of ITSSC members can be Pareto improved.

Mathematics Subject Classification: Primary: 58F15, 58F17; Secondary: 53C35.

 Citation:

• Figure 1.  The ITSSC structure

Figure 2.  The cooperation process and decision sequence

Figure 3.  The relationship between $s^{C\ast}$, $s^{D\ast}$ and $b$

Figure 4.  The relationship between $p_{p}^{C\ast}$, $p_{p}^{D\ast}$ and $b$

Figure 5.  The relationship between $p_{s}^{C\ast}$, $p_{s}^{D\ast}$ and $b$

Figure 6.  The relationship between $D_{p}^{C\ast}$, $D_{p}^{D\ast}$ and $b$

Figure 7.  The relationship between $\pi^\text{TC}$, $\pi^\text{TD}$ and $b$

Figure 8.  The relationship between $p^\text{D1}_{\text{g}}$ and $\sigma$

Figure 9.  The relationship between ($\pi^\text{TD}$, $\pi^{TD1}$), ($\pi ^\text{MD}$, $\pi^{MD1}$, $\pi^\text{RD}$, $\pi^{RD1}$) and $\sigma$

Table 1.  The literature related to IT service supply chain management

 Topic type Reference Problem Research Method ITSSCM Miranda and Kavan (2005) CPEO Optimization Debabrate et al. (2010) CDO and CPEO. Optimization Deepa et al. (2013) CDO and CSO. Empirical study Yili and Paul (2017) Partner selection. Empirical study Jamie et al. (2017) CPEO and SMM. Empirical study Suprateek et al. (2012) Partner selection and VCR. Case study Nishtha et al. (2014) CPEO and VCR. Field study Keumseok et al. (2017) CPEO and VCR. Empirical study Viswanath et al. (2018) CPEO and VCR. Empirical study Haijing et al. (2018) CPEO and VCR. Empirical study

Table 2.  The literature related to optimization and mechanism design of PSSC

 Topic type Reference Problem Research Method Li et al. (2014) Service delivery model Optimization Chen et al. (2017) Service delivery model; Product and service decision. Optimization Dan et al. (2018) Service delivery model; Service decision. Optimization Esmaeili et al. (2014) Product and service decision. Optimization Li et al. (2019) Channel design; Service decision; Channel selection. Optimization Hong et al. (2019) Service delivery model; Supply chain performance evaluation. Optimization Xie et al. (2016) Demand information asymmetry; Product and service decision. Optimization He et al. (2018) The random output; Constraint of service level; Service decision. Optimization Chen et al. (2017) Product and service decision; PSSC coordination. Optimization; Coordination Xiao and Xu (2013) R&D capability information asymmetry; PSSC coordination. Optimization; Coordination Heydari (2014) Service decision; PSSC coordination. Optimization; Coordination Xie et al. (2014) Service cost information asymmetry; Product and service decision. Optimization; Coordination

Table 3.  The relationship between the developer's decisions ($p_{\text{g}}^{\ast}$) and ($p_{s}^{D\ast}$, $p_{s}^{C\ast}$) and parameters ($c_{1}$, $\gamma$)

 Decisions Monotonicity on $c_{1}$ Monotonicity on $\gamma$ $p_{\text{g}}^{\ast}$ $\uparrow$ $\uparrow$ $p_{s}^{D\ast}$ $\uparrow$ $\downarrow$ $p_{s}^{C\ast}$ $\uparrow$ $\downarrow$ Note: "$\uparrow$" represents "increasing" and "$\downarrow$" represents "decreasing".

Table 4.  The relationship between the provider's decisions ($s^{C\ast }$, $s^{D\ast}$) and ($p_{p}^{C\ast}$, $p_{p}^{D\ast}$) and parameters ($c_{1}$, $\gamma$)

 Decisions Monotonicity on $c_{1}$ Monotonicity on $\gamma$ $s^{C\ast}$ $\downarrow$ $\downarrow$ $s^{D\ast}$ $\downarrow$ $\downarrow$ $p_{p}^{C\ast}$ $\downarrow,$ if \$ {1}/{2}
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