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We present an architecture and prototype implementation of a performance management system for cluster-based web services. The system supports multiple classes of web services traffic and allocates server resources dynamically so to maximize the expected value of a given cluster utility function in the face of fluctuating loads. The cluster utility is a function of the performance delivered to the various classes, and this leads to differentiated service. In this paper, we will use the average response time as the performance metric. The management system is transparent: it requires no changes in the client code, the server code, or the network interface between them. The system performs three performance management tasks: resource allocation, load balancing, and server overload protection. We use two nested levels of management. The inner level centers on queuing and scheduling of request messages. The outer level is a feedback control loop that periodically adjusts the scheduling weights and server allocations of the inner level. The feedback controller is based on an approximate first-principles model of the system, with parameters derived from continuous monitoring. We focus on SOAP-based web services. We report experimental results that show the dynamic behavior of the system.