Incorporating Business Impact into Service Offers - A Procedure to Select Cost-Optimal Service Contracts

In this work we address an IT service customer’s challenge of selecting the cost-optimal service among different offers by external providers. We model the customer’s optimization problem by considering the potential negative monetary impact of different combinations of sequential service incidents on a customer business process – reflected via “business cost”. First, we describe which information a customer typically bases service level agreement decisions upon and analyze which additional information is needed to take a well-founded decision. Second, we define a set of constructs that supports customers and providers when selecting or defining service offers, which address the required service criticality. Third, we develop a procedure enabling customers to solve their optimization problem – given different service offers by risk-neutral providers – using a procurement auction. Introducing this approach, we suggest that customers and providers collaborate to define “business cost measures”, which allow providers to better tailor service offers to customers’ business requirements.