Abstract: By adopting ASP-based critical business application service, ASP customers are able to optimize business process and improve operation performance. However, the incapability and moral hazards of ASP providers might also bring the risk to ASP customers’ business operation. In order to solve the problems involving ASP providers’ capability construction and motivation, a multi-task principal-agent model is built. Based on three kinds of capability constructing models, the incentive contracts for the ASP providers that provide critical business application service and execute the two tasks involving the system operation service and the business consultant service are analyzed. Based on the study, if ASP providers’ two-dimensional tasks are motivated, the incentive results are distinctly different for the ASP providers with three kinds of capability construction models, and finally impact ASP customers’ operation performance; ASP providers should select the most suitable capability construction model based on their resources and capability before entering the market of critical business application service; ASP customers should choose the competent ASP providers according to the service market and design the correspond incentive contracts to motivate the ASP providers.

Key words: critical business application service, outsourcing, application service provider, incentive contract, capability construction model