The cost of service quality in IT Outsourcing

In recent years, the IT services industry is under continuous pressure to improve the quality of its services, while doing so at reduced prices. In order to determine quality, the IT industry seems to be converging towards a set of commonly used metrics, including but not limited to, equipment availability, the time to resolve incidents, etc. In order to improve the quality of their services, service providers need to adopt a consistent and continuous focus on their internal processes, the skills of their people, the organizational structure and so on. On the other hand, the IT service industry has been traditionally labor intensive. Even though a wide range of management tools is available to support even the most complex management tasks, the overall service management process still relies on the existence of humans to make important decisions, perform complex administration tasks and monitor the performance and effectiveness of the overall process. This paper studies the tradeoff between the cost of a service (as manifested by the staffing level) and the corresponding quality metrics (subject to the service level agreement). In particular, we study the cost of service quality through the use of an optimization model that takes into account the constraints and cost factors typically encountered in a service provider environment.