Two-staged cloud computing service supply chain coordination with service interruptions

We design a service interruption compensation contract to coordinate a cloud computing service supply chain. The discussed supply chain consists of one application service provider (ASP) and one application infrastructure provider (AIP). AIP packages the computer capacity as services and supplies them to ASP. ASP sells the value-added application services to the market. ASP service system is modeled as an M/M/1 queuing system while the effects of congestion are considered. ASP charges users by the processing time of submitted transactions. Moreover, the market is described as a price-sensitive random demand which follows the Poisson distribution. We discuss three situations involving cloud service interruptions, namely, centralized control, decentralized control and compensation contract. With compensation contract, we find that the discussed supply chain can be coordinated. On the other hand, numerical example shows that it is more important for supply chain coordination to use flexible pricing for AIP´s computing resources, and interruption compensation between AIP and ASP is not a necessary for coordination.