Contract Design Choices and the Balance of Ex Ante and Ex Post Transaction Costs in Software Development Outsourcing

Benaroch, Michel; Lichtenstein, Yossi; Fink, Lior

doi:10.25300/misq/2016/40.1.03

Cited by 68 publications

(53 citation statements)

References 86 publications

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“…Second, prior empirical studies have examined the impact of crossing either a country boundary only (e.g., Cramton & Hinds, ), a firm boundary only (e.g., Espinosa, Cummings, Wilson, & Pearce, ), or both boundaries (e.g., Kotlarsky, Scarbrough, & Oshri, ; Liu & Aron, ) on project outcomes independently. Further, a number of empirical studies focusing on projects that cross firm boundaries often refer to their sourcing structures as “business process outsourcing” or “software development outsourcing” without differentiating the projects that may also cross a country boundary (Benaroch, Lichtenstein, & Fink, ; Chen, Bharadwaj, & Goh, ). Surprisingly, few studies have carried out a systematic comparative assessment of performance differences across the different types of sourcing structures at the project level.…”

Section: Conceptual Foundationmentioning

confidence: 99%

Sourcing structures and the execution efficiency of information technology projects: A comparative evaluation using stochastic frontier analysis

Mishra

Sinha

Thirumalai

et al. 2019

J of Ops Management

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In the pursuit of low‐wage labor and access to technical talent, information technology (IT) projects today are often executed with sourcing structures that span the boundaries of a firm, a country, or both. Although the strategic implications of sourcing structures have received considerable attention in theory and practice, their implications from a project execution standpoint—specifically, in terms of execution efficiency—remain under‐researched. Based on a large primary dataset on IT projects with distributed sourcing structures, this paper documents the findings of a theoretically grounded, empirical investigation using stochastic frontier analysis that evaluates whether and to what extent does the execution efficiency of projects vary across various types of sourcing structures (namely, Domestic‐Insourcing, Domestic‐Outsourcing, Offshore‐Insourcing, and Offshore‐Outsourcing). The results provide support for differential effects of crossing a firm or country boundary, or both boundaries, on the execution efficiency of IT projects. Specifically, we find that the execution efficiency of IT projects is significantly lower when their sourcing structures cross a country boundary (Offshore‐Insourcing and Offshore‐Outsourcing) relative to when their sourcing structures do not cross a country boundary (Domestic‐Insourcing and Domestic‐Outsourcing). Notwithstanding these trends across sourcing structures, a split‐sample analysis of execution efficiency levels reveals that each structure presents a viable alternative for managers to realize high levels of execution efficiency. Finally, additional analysis highlights the benefits of sourcing structure capabilities—as represented by the extent of risk management planning and agile project management—in improving execution efficiency in IT projects that cross a country boundary.

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Section: Conceptual Foundationmentioning

confidence: 99%

Sourcing structures and the execution efficiency of information technology projects: A comparative evaluation using stochastic frontier analysis

Mishra

Sinha

Thirumalai

et al. 2019

J of Ops Management

View full text Add to dashboard Cite

show abstract

“…In addition, fixedprice and time-and-materials contracts are two typical software outsourcing arrangements. Previous research compares the differences between the two contracts in transaction costs [3,8] and incentive mechanisms [13]. However, almost all the analyses mentioned above viewed software outsourcing contracts as complete.…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, almost all the analyses mentioned above viewed software outsourcing contracts as complete. In practice, contracting for software development outsourcing is inevitably incomplete [3] because it typically involves unforeseen contingencies [10], noncontractible investments and behaviors [27], and immeasurable performance [11]. Bhattacharya et al [4] studied incomplete software outsourcing contracts with renegotiation, but they focused on designing a renegotiation-proof contract.…”

Section: Literature Reviewmentioning

confidence: 99%

Renegotiation of Software Outsourcing Contracts

Huang

Kauffman

et al. 2019

Proceedings of the Annual Hawaii International Conference on System Sciences

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Fixed-price and time-and-materials contracts are commonly-used contract forms by clients in software outsourcing. The two parties, client and provider, usually renegotiate the testing time after system development occurs. This research investigates the impacts of such renegotiation on the client's contract choice. Our analysis shows that under both contract forms, renegotiation can incentivize the provider's effort, and this effect becomes more influential when the provider has higher bargaining power. Compared with a fixedprice contract, a time-and-materials contract can stimulate the provider's effort based on the terms for monitoring and reimbursement. The results suggest that when the provider has high bargaining power, the client will prefer a fixed-price contract. But when the provider has low bargaining power and the cost of monitoring is low, the client will prefer a time-andmaterials contract. When the provider has low bargaining power and the cost of monitoring is high though, the client will prefer a fixed-price contract.

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“…As noted by Robillard [1], software development is the "progressive crystallization of knowledge into a language that can be read and executed by a computer" (p.92). Accordingly, a principal challenge that lies at the heart of software development is knowledge asymmetry between those participants who possess business knowledge and developers who possess technical knowledge [2]. Collaboration can mitigate knowledge asymmetry by allowing team members to discuss and reconcile differing views, which can help identify errors early on in the software lifecycle and before they turn into software bugs in production environments.…”

Section: Introductionmentioning

confidence: 99%

Development of a Reading Material Recommender System Based On Design Science Research Approach

Eryilmaz

Thoms

Lee

et al. 2019

Proceedings of the Annual Hawaii International Conference on System Sciences

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Using design science research (DSR), we outline the construction and evaluation of a recommender system incorporated into an existing computersupported collaborative learning environment. Drawing from Clark's communication theory and a user-centered design methodology, the proposed design aims to prevent users from having to develop their own conversational overload coping strategies detrimental to learning within large discussions. Two experiments were carried out to investigate the merits of three collaborative filtering recommender systems. Findings from the first experiment show that the constrained Pearson Correlation Coefficient (PCC) similarity metric produced the most accurate recommendations. Consistently, users reported that constrained PCC based recommendations served best to their needs, which prompted users to read more posts. Results from the second experiment strikingly suggest that constrained PCC based recommendations simplified users' navigation in large discussions by acting as implicit indicators of common ground, freeing users from having to develop their own coping strategies.

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Contract Design Choices and the Balance of Ex Ante and Ex Post Transaction Costs in Software Development Outsourcing

Cited by 68 publications

References 86 publications

Sourcing structures and the execution efficiency of information technology projects: A comparative evaluation using stochastic frontier analysis

Sourcing structures and the execution efficiency of information technology projects: A comparative evaluation using stochastic frontier analysis

Renegotiation of Software Outsourcing Contracts

Development of a Reading Material Recommender System Based On Design Science Research Approach

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