The Forgotten Practices of Subcontracting.

For many software projects the complexity of the final product has increased to a level where it is impossible to build the whole application from the scratch. So, many organizations consider subcontracting as an option for software development. This paper shows generic problems related to software subcontracting. Also, an analysis of CMMI-DEV subcontracting practices to solve these problems is presented. The review also highlights that there are many critical management practices related to outsourcing to ensure a successful overall project

A Method for Evaluating End-User Development Technologies

End-user development (EUD) is a strategy that can reduce a considerable amount of business demand on IT departments. Empowering the end-user in the context of software development is only possible through technologies that allow them to manipulate data and information without the need for deep programming knowledge. The successful selection of appropriate tools and technologies is highly dependent on the context in which the end-user is embedded. End-users should be a central piece in any software package evaluation, being key in the evaluation process in the end-user development context. However, little research has empirically examined software package evaluation criteria and techniques in general, and in the end-user development context in particular. This paper aims to provide a method for technology evaluation in the context of end-user development and to present the evaluation of two platforms. We conclude our study proposing a set of suggestions for future research

The Explanatory Power of the Constructs of Transaction Cost Economics Theory

This Paper analyses the explanatory power of the constructs of transaction cost economics theory (environmental uncertainty, behavioral uncertainty, asset specificity and transaction frequency) in order to determine possible constructs for an endogenous theory of ITO. To analyze this, we employ a large project data set from a German IT outsourcing vendor. We find that only environmental uncertainty and transaction frequency have a high explanatory power and therefore should be considered for an endogenous theory of ITO. Behavioral uncertainty and asset specificity are only of minor relevance. The research is limited by the fact that we employed a data set from only one vendor. We contribute to theory by suggesting possible constructs for an endogenous theory of ITO and to practice by showing that the danger of opportunistic behavior is low. This paper contributes to the ongoing discussion on the applicability of transaction cost economics theory

Are we already in a mature ITO market? A longitudinal study on the effects of market maturity on ITO vendor project performance

Studies on information technology outsourcing (ITO) have shown different results for the influence of prior interaction and contract type on the project performance of the ITO vendor. The ITO market maturity could provide an explanation for these differences. However, it is not clear how to separate the ITO market into different maturity phases to gain insight into any possible effect maturity might have on project performance. We used a large dataset from an ITO vendor to analyze this research gap. We find that the ITO market has increased its maturity and can be separated into an immature phase, occurring between 1997 and 2001, a transition phase, occurring between 2002 and 2008 and a third phase which occurred after 2008. This identification of different phases of ITO market maturity will contribute to a deeper understanding of the influence of ITO market maturity on the project performance of ITO vendors

A Benefits/Challenges Framework for Outsourcing Software Development

As the information technology industry grows, many companies are rethinking their approach to outsourced software development (OSD). This research uniquely explores the premise that many of the benefits of outsourcing software development are also challenging and many of the traditional challenges have beneficial aspects, as set out in a benefits/challenges framework. Additionally, the differences between anticipated/realised benefits and anticipated/occurred challenges are investigated. Ten companies who engage in OSD confirm the benefits / challenges framework in skills, cost, culture, development speed, quality, market proximity, employees and legal aspects of OSD. An unexpected OSD benefit was scalability, outsourcing that enables a company to rapidly scale up production; this is a novel contribution to the literature from this research. Cost reductions from OSD were seen as a significant benefit, but controlling unanticipated costs was also a major challenge, reflecting the paradoxical nature of OSD benefits and challenges fully explored in this research

Contracting for IT Outsourcing with Asymmetric Information

IT outsourcing allows a business to reduce the cost of IT service delivery and improve the quality of IT service by taking advantage of the service provider’s economics of scale and technical expertise. However, the successful outsourcing of IT service is hampered by lack of guidance on how to design incentive contracts to encourage performance of the service provider, especially in the presence of information asymmetry and incentive divergence. In this article, we identify and characterize two asymmetric information factors: asymmetric effort information and asymmetric capability information. Depending on whether the service provider’s effort information and capability information is symmetric or not, we consider three information scenarios and characterize optimal incentive contracts for each scenario. We also introduce the concept of information value to quantify the adverse effects of the two asymmetric information factors. The results provide theoretical support for designing incentive contracts that mitigate the adverse effects of asymmetric information, and recommend effective guidance for activities so as to reduce the degree of information asymmetry

The Impact of Pricing and Opportunistic Behavior on Information Systems Development

Information systems development (ISD) takes place within an economical context. However, the economical conditions that shape ISD practice have hardly been researched. In this paper we study how pricing affects ISD in practice. Based on data collected in the Danish IT industry we used a grounded theory approach to develop a model of the impact of pricing on ISD. The model was refined through the use of principal–agent theory and economic game theory in the form of the prisoner’s dilemma. The model describes the pricing structure, risk distribution, opportunistic behavior and their relationships as the elements that influence ISD practice. On this basis we argue for the uptake of new development approaches such as agile software development (ASD) to improve ISD practice and its outcomes

Why project size matters for contract choice in software development outsourcing

The contractual mechanism of software development outsourcing, typically either fixed-price (FP) or time-and-materials (T&M), determines the nature of incentives, risk sharing, and coordination between client and vendor. While software engineering considers project size as crucial for project planning and success, neither economic nor organizational theory considers size per se among the determinants of contract choice. In this paper, we address the gap between the centrality of project size in the software engineering literature and the attention it receives in software contracting research by modeling and testing the association between project size and contract choice. Existing empirical evidence indicates that FP contracts are appropriate for small development efforts whereas T&M contracts are suitable for larger projects, based on the reasoning that cost and schedule are difficult to estimate in larger projects. This prediction that size is directly associated with contract choice is the basis upon which two models are developed. The first model draws on the contracting efficiency approach to hypothesize that the effect of project size on contract choice is mediated by project detail. The second model draws on the contingency approach to software development risk management to hypothesize that the effect of project size on contract choice is moderated by project detail and vendor familiarity. We test these models using a large portfolio of software development contracts entered into by a leading European bank, and the results confirm that both mediation and moderation are at play

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