Demand heterogeneity in IT infrastructure services: Modeling and evaluation of a dynamic approach to defining service levels

Sagnika Sen, Raghu Santanam, Ajay Vinze

Research output: Contribution to journalArticle

26 Scopus citations

Abstract

A key feature of service-oriented models of information technology is the promise of prespecified quality levels enforceable via service level agreements (SLAs). This poses difficult management problems when considerable variability exists in user preferences and service demand within any organization. Because variance in expectations impact service levels, effective pricing and resource allocation mechanisms are needed to deliver services at the promised quality level. In this paper, we propose a mechanism for SLA formulation that is responsive to demand fluctuations and user preference variance, with the objective of maximizing organizational welfare of the participants. This formulation features a dynamic priority based price-penalty scheme targeted to individual users. An analytical model is presented and evaluated for effectiveness of a proposed dynamic priority-based pricing scheme vis-à-vis a baseline fixed-price single-quality level SLA. Simulations using data from an existing SLA is used to provide evidence that the proposed dynamic pricing scheme is likely to be more effective than a fixed-price approach from a system welfare perspective.

Original languageEnglish (US)
Pages (from-to)258-276
Number of pages19
JournalInformation Systems Research
Volume20
Issue number2
DOIs
StatePublished - Jun 2009

Keywords

  • IT services
  • Outsourcing
  • Service level agreements
  • Simulation

ASJC Scopus subject areas

  • Management Information Systems
  • Information Systems
  • Computer Networks and Communications
  • Information Systems and Management
  • Library and Information Sciences

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