Aligning flexibility with uncertainty in software development arrangements through a contractual typology

Purpose The purpose of this study is to identify a typology of procurement contracts in the context of software development projects that allows firms to align design flexibility with design uncertainty at the project level. The theoretical lenses of contract theory and software engineering are used to explain why the five archetypes in the proposed typology provide gradually increasing levels of design flexibility and to develop hypotheses about the associations between design flexibility and a set of project cost dimensions. Design/methodology/approach The hypotheses are tested with objective contractual data from 270 software development contracts entered into by a leading international bank over a period of three years. Findings Data analysis confirms the existence of the proposed typology and shows that design flexibility is negatively associated with control and positively associated with coordination, trust, duration and price. Research limitations/implications Although the findings are based on the contracting practices of a single, albeit sophisticated, organization, they shed light on the ability of firms to align flexibility with uncertainty at the onset of new projects by taking advantage of nuanced contractual mechanisms to produce a broader set of contractual archetypes. Originality/value This paper is the first in the outsourcing literature to analyze a nuanced contractual typology in software development projects through the perspectives of both contract theory and software engineering

Moderating Effects of Requirements Uncertainty on Flexible Software Development Techniques

Partially due to increasing requirements uncertainty, flexibility has been in the focus of many software development activities for many years. Only few studies have analyzed the indirect effect that different levels of requirements uncertainty have on the effects of established flexible development techniques. This study analyzes how requirements uncertainty moderates the well studied effects of (1) sequential development, (2) investment in architectural design, and (3) intensity of early feedback on the performance of contract development projects. It finds that requirements uncertainty negatively moderates the effects of sequential development. It also points out that requirements uncertainty negatively moderates the effect of investment in architectural design. For agile development approaches, the value of investment in architectural design falls with increasing uncertainty. However, for plan-driven approaches, investment in architectural design is positive at any level of requirements uncertainty. Finally, the paper finds that early feedback throughout the development process is helpful at any level of requirements uncertainty

Determinants of Inter-Firm Contractual Relations: A Case of Indian Software Industry

We analyze the impediments to inter-firm contractual relations, existing formal and informal ways of getting around them, especially the role of reputation and trust in mitigating the conflict of interest between the firms. We study it in the context of Indian IT industry. Contract design is specified as a function of reputation (age, repeated contracts and quality certification), asset specificity, complexity and uncertainty. We test the likelihood of observing Time & Material contract, a better propertied contract in the face of uncertainty. Empirical evidence conforms the propositions posited. Reputed firms tend to get highly complicated and uncertain projects. Asset specific investments do not seem to have any implication on contract type and complexity. The results broadly hint that the firms reckon more on creating an understanding through formal quality certifications to solve pre-contractual adverse selection problems and repeated contracting to solve the problems of behavioral uncertainties rather than relying on the court.Transaction Cost; Inter-firm Contractual Relations; Reputation and Outsourcing

The perception and management of risk in UK office property development

Risk is an ever-present aspect of business, and risk taking is necessary for profit and economic progress. Speculative property development is popularly perceived as a 'risky business' yet, like other entrepreneurs, developers have opportunities to manage the risks they face; techniques include phasing and joint ventures. The associated areas of investment portfolio risk, development risk analysis and construction risk management have all been addressed by research. This article presents new knowledge about how developers perceive risks and the means they subsequently adopt to manage them. The developers of office projects across the UK were sent questionnaires by post. Respondents were asked about their perceptions of risks at the first appraisal stage and currently and about the risk management techniques that they had adopted. In-depth interviews with a selection of respondents were then used to discuss and augment the findings. Developers were most concerned about market-based risks at both stages. Concern about production-orientated risks was lower and fell significantly between the two stages. A fixed price contract was the most common risk management technique. Risk management techniques were used more often outside London and the South East. Developer type affects both the perception and management of risk. While developers do manage risk, decisions are made on the basis of professional and business experience. These findings should help development companies manage risk in a more objective and analytical way

Project communication variables : a comparative study of US and UK industry perceptions

Research undertaken at the Construction Industry Institute (CII) in the USA has indicated the need for project managers to focus their attention on six ‘Critical Communication Variables’ as a means of ensuring the fulfillment of time cost and quality targets. These variables refer to the accuracy, timeliness and completeness of information presented to participants, as well as the level of understanding, barriers to and procedures for project based communication. The findings and tools generated by the CII study have been used as part of case study based research examining construction projects in the Central Belt region of Scotland. In addition to the CII data collection tools employed, the Scottish study included semi-structured interviews as a means of contextualising the communication and decision-making taking place. This paper presents the results of this benchmarking exercise, and highlights significant issues that project team members need to improve upon in order to achieve the timeliness quality and cost required in today’s construction industr

Can anybody help? : mitigating IS development project risk with user

In this paper we aim to gain insight into the relationship between user participation modes and project risk factors, and then we construct a model that can be used to determine how user participation can be successfully applied in ISD projects with a given set of risk factors. We perform an in-depth literature review, which aims to clarify the concept of user participation as part of risk management. We then report on the results of a case study in Cap Gemini where we conduct an exploratory research of the application of user participation in practice. For this exploratory research, a quantitative and qualitative research method was designed in the form of a survey and interviews. Though the results from our case study we gain insight into the relationship between user participation and IS project risk and also determine how user participation can be used to mitigate such risk

The practice of risk management by cost consultants in Northern Ireland

This research endeavoured to explore the practice of risk management by cost consultants in Northern Ireland. It attempted to subjectively investigate the cost consultant’s appreciation of risk management practices and then further appraise the cost consultant’s understanding and usage of the theories and techniques available to manage risk under the risk management framework. A case study based approach involving five consultancy practices was adopted. A series of semi structured interviews (one per each case study) was carried out. The data collected was analysed using the Delphi technique. The practice of risk management for each organisation was documented using an analysis and evaluation of project documentation substantiated with interviews. The research indicated that consultants have a broad awareness of risk management but disparity exists on considering it as a core service. All consultants were unequivocal in identifying the need for an improved risk management framework. It was evident that there was a lack of knowledge of the array of risk identification and analysis techniques available. The research has established that there is a severe need to bridge the void between the theories and techniques used to manage risk and those which are implemented in practice. There is a necessity to train consultants in the practice of risk management and educate clients in the benefits of enforcing risk management practices as an integral part of project delivery