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

Abstract

<p style='text-indent:20px;'>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 <inline-formula><tex-math id="M1">\begin{document}$ + $\end{document}</tex-math></inline-formula> service cost sharing <inline-formula><tex-math id="M2">\begin{document}$ + $\end{document}</tex-math></inline-formula> product revenue sharing", not only the total profit of ITSSC can be increased, but also the profit of ITSSC members can be Pareto improved.</p>