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A dynamic model of offshore software development

  • Research Article
  • Published:
Journal of Information Technology

Abstract

As the offshoring of knowledge work has accelerated, theoretical models to explain the phenomenon have not kept up. Most theoretical models assume a static transactional relationship from various factors to a binary offshoring decision. Such models do not take into account the mix of sourcing choices at the level of a firm, nor do they consider dynamic changes over time. To help fill these gaps, we use five case studies on offshore migration of software work by major US companies. Data were collected from senior executives. We use these data to develop a dynamic conceptual model that incorporates three factor groupings which collectively help explain offshore sourcing outcomes: (1) economic factors; (2) the nature of the development activity; and (3) managerial capabilities and practices. Importantly, the model includes five feedback loops among sourcing decisions, sourcing mix, and these three factors. Thus, the relationships in the model are not unidirectional, nor static; rather, they are iterative and dynamic, involving feedback loops, learning, and cumulative effects over time. In this dynamic model, the sourcing ‘mix,’ a continuously changing offshore portfolio, is a key firm-level dependent variable, closer to the economic concept of a ‘stock’ measure that represents the cumulative effect of sourcing decisions over time. This variable may be measured in different ways, for instance as the amount of work done offshore, or the number of workers employed offshore.

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Notes

  1. The authors thank an anonymous reviewer for this suggestion.

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Acknowledgements

This research is supported by a grant from the US National Science Foundation (SES-0527180).

Author information

Authors and Affiliations

  1. School of Information Studies, Syracuse University, Syracuse, USA

    Jason Dedrick

  2. Kogod School of Business, American University, Washington DC, USA

    Erran Carmel

  3. Personal Computing Industry Center, University of California, Irvine, USA

    Kenneth L Kraemer

Authors
  1. Jason Dedrick
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  2. Erran Carmel
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  3. Kenneth L Kraemer
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Appendix

Appendix

Interview protocol

  1. 1

    Company/unit overview

    1. a

      Company size.

    2. b

      Number of developers.

    3. c

      What types of software development are done? How is the development process organized?

  2. 2

    Economic factors

    1. a

      To what extent are you decisions to locate work offshore driven by cost reduction goals? What costs are taken into consideration? For example direct labor costs, cost of coordinating onshore and offshore teams, communications, travel, other?

    2. b

      What are the key skills required for your development activities? Are they in short supply in the US? Are they more easily available in offshore locations?

    3. c

      What risks are associated with offshoring this activity?

    4. d

      To what extent are your onshore/offshore and location decisions influenced by access to local markets?

    5. e

      To what extent are they influenced by government incentives or other policies?

  3. 3

    Nature of activities and relational factors

    1. a

      Complexity: Is this activity highly complex, or relatively simple?

    2. b

      Modularity: How much can various activities be carried out independently of other activities?

    3. c

      Codified vs tacit knowledge: How well is knowledge documented and easily transferred?

    4. d

      Proximity: Does this activity require or benefit from close proximity?

    5. e

      Social Networks: Relationships that are: ethnic, geographic, professional, family, alumni, etc.

  4. 4

    Management practices

    1. a

      What organizational structures and management processes are in place for collaborative work?

    2. b

      How are the different processes involved in this activity coordinated within the organization or across organizational boundaries?

    3. c

      Have your management practices changed as a result of offshoring?

    4. d

      How does your firm manage resources and vendors on a global basis?

    5. e

      Are you decisions made with a broad systemic view, or on a more individual basis?

    6. f

      Was there an individual (or individuals) who championed offshoring in the company? Who? What was the basis of their enthusiasm?

  5. 5

    Sourcing decisions and trends

    1. a

      Offshoring: How does your company divide software development geographically, that is, what is done in the US, what is done in other locations?

    2. b

      Outsourcing: How does your company organize these processes organizationally, that is, what is done in-house and what is outsourced?

    3. c

      Industry Trends: What is the trend in your company in recent years in terms of offshoring and outsourcing? What is the trend in your industry? Are your decisions influenced by industry trends?

    4. d

      IT provider: Chicken & Egg. Are your locational resources dictating where work is sent or is it client demand?

    5. e

      Are your offshore outsourcing contracts larger/smaller or longer/shorter than onshore contracts?

  6. 6

    Dynamics and feedback effects

    1. a

      How have the experiences from prior offshore sourcing decisions affected later decisions?

    2. b

      What resources have been created in offshore locations? How do these affect sourcing decisions?

    3. c

      Have your management practices or organizational dynamics (e.g., who makes what decisions?) changed since you’ve been developing offshore?

    4. d

      Has the nature of your software development activity been affected by offshoring and your associated management practices? Is it more mature, modular, better documented, more codified?

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Dedrick, J., Carmel, E. & Kraemer, K. A dynamic model of offshore software development. J Inf Technol 26, 1–15 (2011). https://doi.org/10.1057/jit.2009.23

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