SaaS Cloud Outsourcing Contract Design and Analysis under Asymmetric Information

Abstract

Outsourcing application services to SaaS providers introduces moral hazards due to the unobservable efforts of CSPs in data security and QoS. This study addresses the principal-agent problem stemming from asymmetric information by designing outsourcing contracts for cooperative and non-cooperative client enterprises within a “one to many” SaaS environment, with the aim of maximizing their expected utility. The study reveals that cooperative patterns align client and CSP interests by equating client revenues to CSP-provided security deposits, ensuring stability. Non-cooperative patterns, however, can lead to strategic games where the first-mover advantage may invert, with later movers compensating, and sometimes transforming an initial advantage into a disadvantage. The decision to cooperate hinges on bargaining power and the impact of CSP efforts on outputs, particularly in the multifaceted areas of data security and QoS. This research offers insights into managing risks from CSPs’ unobservable efforts and understanding the strategic interactions among client enterprises in SaaS outsourcing.

Keywords

Software as a service / cloud outsourcing / contract design / moral hazard / data security / quality of service (QoS)

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Systems Engineering Society of China and Springer-Verlag GmbH Germany

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