Coordination strategy in a SaaS supply chain with network effect and SLA

Cloud computing is a rising type of service system in today´s IT world. We try to design an appropriate contract to coordinate a SaaS (software-as-a-service) service supply chain characterized by network effect, service level and delay cost. Our paper highlights the impact of application infrastructure or platform provider´s technical ability and effort level on the behaviour of application service provider (ASP). Also, we find out that network effect is a double-edged sword - it magnifies both benefits and damage. Finally, through theoretical and quantitative analyses, we prove that only a combined contract of cost sharing, revenue sharing and wholesale price is able to coordinate the SaaS supply chain, but any isolated strategy will fail.