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

  • *Corresponding author: Tinghai Ren

    *Corresponding author: Tinghai Ren 
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  • 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.


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  • 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
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    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
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    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 $" represents "decreasing".
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    Table 4.  The relationship between the provider's decisions ($ 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}<b<1 $ $ \uparrow, $ if $ 1<b<{2}/{c_{1}} $ $ \downarrow, $ if $ {1}/{2}<b<1 $ $ \uparrow, $ if $ 1<b<{2}/{c_{1}} $
    $ p_{p}^{D\ast} $ $ \downarrow, $ if $ {1}/{2}<b<1 $ $ \uparrow, $ if $ 1<b<{2}/{c_{1}} $ $ \downarrow, $ if $ {1}/{2}<b<1 $ $ \uparrow, $ if $ 1<b<{2}/{c_{1}} $
    Note: "$ \uparrow $" represents "increasing" and "$ \downarrow $" represents "decreasing".
     | Show Table
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