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Utility computing environments provide on-demand IT services to customers. Such environments are dynamic in nature and continuously adapt to changes in requirements and system state. Errors are an important category of environment state changes as such environments consist of a large number of components, and hence, are subject to errors. In this paper, we design and implement a model-based simulation framework that leverages information about existing service components and their interactions, and provides concrete service behavior in presence of a variety of errors. To evaluate the framework, experiments are conducted on a virtualized blade-server based environment. Results show that the framework is effective and practical in analyzing error impacts on IT services.