Explaining Variations in Client Extra Costs between Software Projects Offshored to India

Gaining economic benefits from substantially lower labor costs has been reported as a major reason for offshoring labor-intensive information systems services to low-wage countries. However, if wage differences are so high, why is there such a high level of variation in the economic success between offshored IS projects? This study argues that offshore outsourcing involves a number of extra costs for the ^his paper was recommended for acceptance by Associate Guest Editor Erran Carmel. client organization that account for the economic failure of offshore projects. The objective is to disaggregate these extra costs into their constituent parts and to explain why they differ between offshored software projects. The focus is on software development and maintenance projects that are offshored to Indian vendors. A theoretical framework is developed a priori based on transaction cost economics (TCE) and the knowledge-based view of the firm, comple mented by factors that acknowledge the specific offshore context The framework is empirically explored using a multiple case study design including six offshored software projects in a large German financial service institution. The results of our analysis indicate that the client incurs post contractual extra costs for four types of activities: (1) re quirements specification and design, (2) knowledge transfer, (3) control, and (4) coordination. In projects that require a high level of client-specific knowledge about idiosyncratic business processes and software systems, these extra costs were found to be substantially higher than in projects where more general knowledge was needed. Notably, these costs most often arose independently from the threat of oppor tunistic behavior, challenging the predominant TCE logic of market failure. Rather, the client extra costs were parti cularly high in client-specific projects because the effort for managing the consequences of the knowledge asymmetries between client and vendor was particularly high in these projects. Prior experiences of the vendor with related client projects were found to reduce the level of extra costs but could not fully offset the increase in extra costs in highly client-specific projects. Moreover, cultural and geographic distance between client and vendor as well as personnel turnover were found to increase client extra costs. Slight evidence was found, however, that the cost-increasing impact of these factors was also leveraged in projects with a high level of required client-specific knowledge (moderator effect).

Der Einfluss kultureller Unterschiede beim IT-Offshoring

Dieser Beitrag zeigt auf der Basis von sechs Anwendungsentwicklung-sprojekten in Indien, welche kulturellen Einflussgrößen bei der Auslagerung von IT-Projekten einzubeziehen sind, wie diese Determinanten den Projekterfolg beeinflussen und durch welche Maßnahmen von Seiten des Managements kulturelle Herausforderungen zur Sicherung des Projekterfolgs gemeistert werden können: - Als kritische Kulturfaktoren haben sich Unterschiede in der Macht-distanz, dem Designverständnis und der aktiven versus passiven Arbeitseinstellung herauskristallisiert. - Diese Faktoren wirken direkt auf wichtige Stellgrößen der Beziehungs-qualität, wie dem Vertrauen, der Leistung des Anbieters, dem Grad der Kooperation und auftretenden Konflikten. Auf diese Weise wirken sie indirekt auf den Erfolg von Offshoring-Projekten. - Eine klare Definition von Rollen und Mechanismen, starke Mitarbeiterführung und ein aktives Kulturmanagement, das eine An- passung an die Kultur des Kunden oder an die des Anbieters beinhaltet, haben sich als effektive Managementmaßnahmen zur Bewältigung kultureller Herausforderungen herausgestellt

Herausforderungen und Chancen der Internationalisierung für mittelständische Softwareunternehmen in Deutschland

Die Internationalisierung ist für Softwareunternehmen im deutschen Mittelstand einerseits ein Muss, um den Anforderungen international ausgerichte-ter Kunden gerecht zu werden, anderseits eröffnet sie der Softwarebranche die Chance, aktiv neue Märkte zu erschließen. Anhand ausgewählter Beispiele deutscher Softwareunternehmen, die bereits international tätig sind, werden in die-ser Studie auf Basis von Experteninterviews Treiber, Strategien und Umsetzungs-ansätze der Internationalisierung vor dem Hintergrund der jeweiligen Eigenschaf-ten der Softwareprodukte dargestellt. Die Ergebnisse zeigen erste Zusammenhänge auf und bieten wichtige Ansatzpunkte für weitere Forschung im Bereich der Internationalisierung von Softwareunternehmen.

The Emergence of Partnership Networks in the Enterprise Application Development Industry - A Global Corporation Perspective

Currently, dramatic changes are happening in the IS development industry. The incumbent system developers (hubs) are embracing partnerships with less well established companies (spokes), acting in specific niches. This paper seeks to establish a better understanding of the motives for this strategy. Relying on existing work on strategic alliance formation, it is argued that partnering is particularly attractive, if these small companies possess certain capabilities that are difficult to obtain through other arrangements than partnering. Again drawing on the literature, three categories of capabilities are identified: the capability to innovate within their niche, the capability to provide a specific functionality that can be integrated with the incumbents’ systems, and the capability to address novel markets. These factors are analyzed through a case study. The case represents a market leader in the global IS development industry, which fosters a network of smaller partner firms. The study reveals that temporal dynamics between the identified factors are playing a dominant role in these networks. A cyclical partnership model is developed that attempts to explain the life cycle of a partnership within such a network.