Designing Scalable Business Models

Digital business models are often designed for rapid growth, and some relatively young companies have indeed achieved global scale. However despite the visibility and importance of this phenomenon, analysis of scale and scalability remains underdeveloped in management literature. When it is addressed, analysis of this phenomenon is often over-influenced by arguments about economies of scale in production and distribution. To redress this omission, this paper draws on economic, organization and technology management literature to provide a detailed examination of the sources of scaling in digital businesses. We propose three mechanisms by which digital business models attempt to gain scale: engaging both non- paying users and paying customers; organizing customer engagement to allow self- customization; and orchestrating networked value chains, such as platforms or multi-sided business models. Scaling conditions are discussed, and propositions developed and illustrated with examples of big data entrepreneurial firms

Organizational Control Systems and Software Quality: A Cross-National Study.

This study explores the relationship between organizational control modes (behavior, outcome, and clan) andsoftware quality. Much of the previous work on organizational control has examined the choice of modes giventask characteristics. This research extends work in control theory by considering the impact of control modeson the increasingly critical organizational outcome of software quality. The research is set in the context ofsoftware development organizations in three of the largest software developing countries: India, Ireland, andIsrael (the 3Is). A cross sectional survey of 400 software development organizations across the 3Is will be usedto test the developed model. In addition to the theoretical contributions, the study will provide practicalimplications to support software project managers in making better organizational control choices

The Optional Value of IS Projects - A Study of an IS Portfolio at a Multinational Manufacturer

The IS research literature has tested the applicability of option pricing models to IS projects mostly through detailed case studies. The current study complements this literature by considering a wide set of IS projects and assessing, albeit crudely, their optional value. We test the literature’s assumption that IS projects embed significant optional value. Our research site is a European plant of a leading multinational manufacturer of sophisticated products. The portfolio of current and recent IS projects is studied through a questionnaire administered to all project managers. Seventeen project managers were interviewed concerning thirty-one projects with median cost of $325k and median benefit of$1.2m. We find strong support to the prediction that IS projects include considerable optional value. The thirty one projects we studied embed forty seven options, many of them with benefits comparable to the value of the original projects. Only four projects had no optional value. A comparison between a subset of the portfolio and the corresponding scale-up options shows that the exercise price of the options is 20% of the original projects’ cost, and that the value of these options is about 70% of the original projects’ value. This data also demonstrates the large return, of scale-up options – the median return is 1500%, five fold the median return of projects. The main practical implication of this study is that real option evaluation is useful for IS projects in general, and should not be confined to special cases. A further implication is that real option thinking may be of particular value in recognising reduction and deferral options. The project managers in our study found such options difficult to identify and considered their time to expiration as relatively short. Proactive management of reduction and deferral options should thus increase the flexibility and value of IS projects

Pricing Software Development Services

This paper studies the pricing of software development outsourcing. Two pricing techniques – time and material and fixed price – are described and the economic conditions for selecting between them are discussed. Using agency theory and transaction cost economics, it is predicted that risky and specific systems will be priced on time and material basis while other projects will be fixed price. An additional prediction is that confidence in the vendor’s auditing of resources is essential for time and material contracts. The predictions are tested on fourteen external software development projects in two large corporations. Quantitative measures of risk, specificity and confidence are utilised, but the data-set does not support the theoretical predictions. In order to explain this result, interviews with senior managers at the two corporations have been conducted. Both disagree with the theoretical prescriptions: one contracts risky projects on fixed price basis, preferring to pay a risk-premium rather than to rebudget. The second expert allows fixed price only with trusted vendors, preferring time and material with all other vendors

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

Pre-defined and Optional Staging for the Deployment of Enterprise Systems: a case study and a framework

The effective deployment of enterprise systems has been a major challenge for many organisations. Customising the new system, changing business processes, and integrating multiple information sources are all difficult tasks. As such, they are typically done in carefully planned stages in a process known as phased implementation. Using ideas from Option Theory, this article critiques aspects of phased implementation. One customer relationship management (CRM) project and its phased implementation are described in detail and ten other enterprise system deployments are summarised as a basis for the observation that almost all deployment stages are pre-defined operational steps rather than decision points. However, Option Theory suggests that optional stages, to be used only when risk materialises, should be integral parts of project plans. Although such optional stages are often more valuable than pre-defined stages, the evidence presented in this article shows that they are only rarely utilised. Therefore, a simple framework is presented; it first identifies risks related to the deployment of enterprise systems, then identifies optional stages that can mitigate these risks, and finally compares the costs and benefits of both pre-defined and optional stages

The ownership of digital infrastructure: Exploring the deployment of software libraries in a digital innovation cluster

Boundary resources have been shown to enable the arm’s-length relationships between platform owners and third-party developers that underlie digital innovation in platform ecosystems. While boundary resources that are owned by open-source communities and smaller-scale software vendors are also critical components in the digital infrastructure, their role in digital innovation has yet to be systematically explored. In particular, software libraries are popular boundary resources that provide functionality without the need for continued interaction with their owners. They are used extensively by commercial vendors to enable customization of their software products, by communities to disseminate open-source software, and by big-tech platform owners to provide functionality that does not involve control. This paper reports on the deployment of such software libraries in the web and mobile (Android) contexts by 107 startup companies in London. Our findings show that libraries owned by big-tech companies, product vendors, and communities coexist; that the deployment of big-tech libraries is unaffected by the scale of the deploying startup; and that context evolution paths are consequential for library deployment. These findings portray a balanced picture of digital infrastructure as neither the community-based utopia of early open-source research nor the dystopia of the recent digital dominance literature

Puzzles in software development contracting

Current outsourcing practices are relatively unsophisticated in comparison with the techniques prescribed by economic theory. Customers end up bearing all long-term risk, and vendors have no direct incentive to achieve long-term system effectiveness

Model Based Test Generation for Processor Verification

A few simple Expert-System techniques have been invaluable in developing a new test program generator for design verification of hardware processors. The new generator uses a formal declarative model of the processor architecture; it allows generation of test programs for a variety of processors without duplication of effort