Outsourcing Internet Security: The Effect Of Transaction Costs On Managed Service Providers
- Topics:
- Outsourced Services
- Tags:
- Business Operations,
- It Operations,
- Outsourcing,
- Outsourcing & Subcontracting,
- Transaction Cost
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Overview: Transaction costs are a significant factor in outsourcing decisions. In the case of Internet security, outsourcing has higher transaction costs for two major reasons: The outsourcing process is not yet standardized; and there is uncertainty about the frequency and impact of cyber attacks creating large variations in coordination costs. This paper studies the effects of transaction costs on provider pricing strategies aiming toward guidelines that are beneficial for both buyers and providers. A game-theoretic model is structured that incorporates the two special features of transaction costs for security outsourcing. When transaction costs are high, Managed Security Service Providers (MSSPs) have to charge a lower overall price for their services to balance these costs.
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Format: PDF | Size: 168KB | Date: Feb 2006 | Pages: 10
