Interdependencies in it infrastructure services: Analyzing service processes for optimal incentive design

Sagnika Sen, Raghu Santanam

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

Information technology (IT) infrastructure outsourcing arrangements involve multiple services and processes that are interdependent. The interdependencies pose significant challenges in designing appropriate incentives to influence a provider's effort-allocation decisions. By integrating process modeling fundamentals with multitask agency theory, we enumerate the base set of possible interrelationships among different IT service processes and derive corresponding optimal incentives. Our results demonstrate the impacts of risk profile, random noise, value-cost ratio, and process structure on optimal incentive rates. We find that the current practice of treating IT services as essentially independent is optimal only in limited settings where both the service provider and customer are risk neutral. Interestingly, incongruent performance measures require optimal incentive rates to respond in complex ways to the strength of coupling between services and the complementarity and substitutability of services. We also analyze more complex process scenarios using different combinations of the base set. The results demonstrate that, while the findings from the base set largely hold, the value-cost ratio of the services and the performance measure congruity can pose unique challenges in determining incentive rates.

Original languageEnglish (US)
Pages (from-to)822-841
Number of pages20
JournalInformation Systems Research
Volume24
Issue number3
DOIs
StatePublished - 2013

Fingerprint

Information technology
incentive
infrastructure
information technology
Outsourcing
Costs
outsourcing
costs
service provider
performance
Optimal design
Interdependencies
Incentives
Service process
IT infrastructure
Values
customer
scenario
Performance measures

Keywords

  • Agency theory
  • Incentives
  • IT outsourcing
  • Process interdependence
  • Service level agreements

ASJC Scopus subject areas

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

Cite this

Interdependencies in it infrastructure services : Analyzing service processes for optimal incentive design. / Sen, Sagnika; Santanam, Raghu.

In: Information Systems Research, Vol. 24, No. 3, 2013, p. 822-841.

Research output: Contribution to journalArticle

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