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

Tinghai Ren; Kaifu Yuan; Dafei Wang; Nengmin Zeng

doi:10.3934/jimo.2021165

Article Contents

2022, Volume 18, Issue 6: 4409-4432. Doi: 10.3934/jimo.2021165

This issue Previous Article Global convergence of a modified Broyden family method for nonconvex functions Next Article Numerical solution to optimal control problems of oscillatory processes

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

1.
School of Business Administration, Guizhou University of Finance and Economics, Guiyang 550001
2.
School of Economics and Management, Harbin Engineering University, Harbin 150001

^*Corresponding author: Tinghai Ren
^*Corresponding author: Tinghai Ren

Received: March 31, 2021

Revised: June 30, 2021

Early access: September 2021

Published: September 2022

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Abstract

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.

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

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Figure 1. The ITSSC structure

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Figure 2. The cooperation process and decision sequence

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

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

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

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

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

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

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

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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".

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