Risk assessment in service provider communities

•We investigate the notion of risk from the perspective of clients and providers.•We determine how a service owner can balance the loss and the cost of replication.•We discover that combining services in types can impact the level of profit/loss.•We show how a demand for types can impact the overall community.

Online service delivery undertaken between clients and service providers often incurs risks for both the client and the provider, especially when such an exchange takes place in the context of an electronic service market. For the client, the risk involves determining whether the requested service will be delivered on time and based on the previously agreed Service Level Agreement (SLA). Often risk to the client can be mitigated through the use of a penalty clause in an SLA. For the provider, the risk revolves around ensuring that the client will pay the advertised price and more importantly whether the provider will be able to deliver the advertised service to not incur the penalty identified in the SLA. This becomes more significant when the service providers outsource the actual enactment/execution to a data centre — a trend that has become dominant in recent years, with the emergence of infrastructure providers such as Amazon. In this work we investigate the notion of “risk” from a variety of different perspectives and demonstrate how risk to a service owner (who uses an external, third party data centre for service hosting) can be managed more effectively. A simulation based approach is used to validate our findings.