CRITICAL SUCCESS FACTORS OF OFFSHORE SOFTWARE DEVELOPMENT PROJECTS

Index

Classification
Description
Comparison

Based on the results of the annotated bibliography (compare section 3.4), a comprehensive literature research focusing on CSF research in the field of IT outsourcing was carried out. Here, beside the already examined key IS conferences and journals, books on the subject of IT outsourcing (in a broad sense) as well as scientific online databases were scanned in an effort to find studies dealing with the (critical) success factors of relevant outsourcing projects. For the identification of respective studies, the mentioned data sources were searched for key words like “success”, “(critical) success factor(s)”, “IT outsourcing”, “IT offshoring”, and “offshore software development”.

On the basis of the conducted literature research a total of 15 articles and literary contributions, which explicitly concentrate on the (critical) success factors of relevant projects in the IT outsourcing context, were able to be identified (listed alphabetically): Adelakun and Jennex (2003), Berger et al. (2004), BITKOM (2005), Brown and Wilson (2005), Cullen and Willcocks (2003), Delmonte and McCarthy (2003), Gupta and Raval (1999), Kobayashi-Hillary (2004), Laabs (2004), Mani and Rajkumar (2001), Oecking and Westerhoff (2005), Rao (2004), Raval (1999), Sparrow (2003), and Stephan (2005). A brief description of these 15 studies can be found in section 5.2.2.

In a first step, the identified studies were classified into research fields, perspectives, and research methods applied. Next, the individual studies were briefly described and then compared to one another in regard to their specific content. Here, it became apparent that, at present, only a few studies exist which focus on the CSF of OSD projects, and that the majority of these studies concentrate on U.S. companies (e. g., Delmonte and McCarthy, 2003). In contrast, we do not know of any studies which focus on the examination of CSF for OSD projects in regard to German-speaking companies. In this context, a number of studies dealing with the (critical) success factors of related subject areas such as IT outsourcing (e. g., Berger et al., 2004) and IT offshoring (e. g., BITKOM, 2005) exist. Although, the (critical) success factors introduced in these studies can in part be transferred to OSD, none of them addresses the more specific challenges this modified form of IT outsourcing/offshoring presents.

In the following Table a classification of the identified studies is carried out. In regard to the research fields, the table distinguishes between studies dealing with the (critical) success factors of IT outsourcing, IT offshoring, and OSD projects. Further classification criteria include the perspective from which the (critical) success factors are examined (client or provider), the specific research method applied in the identification process (literature research, interviews, case studies, experience), as well as the total number of (critical) success factors mentioned within the individual studies.

Table: Classification of identified (critical) success factor lists in the IT outsourcing context

The classification shows that four of the identified studies focus explicitly on the (critical) success factors of OSD. While two of these studies examine the (critical) success factors from a client’s perspective, the other two studies represent a provider’s point of view. Out of the remaining eleven studies, six focus on the (critical) success factors of IT offshoring and five on the (critical) success factors of IT outsourcing projects.

Furthermore, the majority of the (critical) success factor studies are based upon the experience of the authors themselves (ten studies). In contrast, only three authors confirm that their list of (critical) success factors relies on literature research, while only two authors mention interviews or case studies as their primary source of information in developing their respective (critical) success factor lists.

The length of the individual lists of (critical) success factors ranges from four to 35 factors. However, the majority of these lists include less than ten (critical) success factors. Only two studies contain more than 20 factors.

Our CSF list focuses on OSD and primarily reflects a client’s point of view. In identifying the 29 CSF, a comprehensive literature research as well as the realization of expert interviews served as sources of information (compare with gray highlighted row in Table 26).

The contents of the 15 (critical) success factor lists related to the field of IT outsourcing (in a broad sense), which were identified within the literature review, will be described briefly in the following (in alphabetical order according to the name of the first author).

Adelakun and Jennex (2003) examine the CSF of small and medium-sized service providers, which offer OSD services, in a survey. After an evaluation of 31 initial factors, six CSF were able to be identified.

The authors Berger et al. (2004) mention a total of twelve factors which determine the success or the failure of an IT outsourcing project from a client’s point of view.

The study from BITKOM (2005) lists a total of 35 factors which can be regarded as critical for the successful implementation of IT offshoring projects. These were identified with the support of previous experiences with both successful as well as aborted projects. The 35 factors are divided into the categories “Planning”, “Decision Process”, “Partner Selection Criteria”, “Implementation and Controlling”, and “Project Conclusion or Reintegration”.

The authors Brown and Wilson (2005) submit a number of different proposals for the successful execution of IT outsourcing projects in their book. The proposals mentioned were transferred into a list of nine success factors.

Cullen and Willcocks (2003) state that the success of an IT outsourcing project depends significantly on the actions of the parties involved. Based on a multitude of case studies, the authors derived eleven CSF.

On the basis of a publication analysis which focused on the advantages and risks of OSD as well as on the discussion of the individual factors which influence the decision to engage in OSD, Delmonte and McCarthy (2003) identified five CSF.

Gupta and Raval (1999) assume that the first offshoring project implemented by a company only in very few cases proves to be successful. In line with their experience and case studies in the field of IT offshoring, the authors propose seven key factors for the success of such a project.

In his book, Kobayashi-Hillary (2004) mentions four critical areas which are, from his point of view, essential for the successful implementation of an IT offshoring project. It has to be added that the author regards India as the relevant offshore destination.

Laabs (2004) examines the advantages and disadvantages of using offshore resources as well as the transfer of IT activities to foreign companies. In doing so, he refers to five CSF.

Based upon their own experiences and interviews with IT offshoring providers, Mani and Rajkumar (2001) list a total of 21 key success factors in regard to OSD projects. These factors can be divided into four categories: Management, project, client, and personal factors.

In their publication, the authors Oecking and Westerhoff (2005) focus on the success of long-term outsourcing relationships. From their point of view, a company should consider five fundamental factors when developing a long-term IT outsourcing partnership.

Rao (2004) examines the challenges global IT outsourcing poses to managers, thereby determining five key factors from a client’s point of view. These factors primarily focus on the destination country of an IT offshoring initiative as well as on the employees deployed within the course of an offshore project.

Independent of the various forms of IT offshoring and their respective advantages and disadvantages, Raval (1999) aims to create an understanding of the essential factors which influence the success of an OSD project. In doing so, the author compiles a list of seven key factors.

In her book, Sparrow (2003) examines the effective management of IT outsourcing projects. The implications made in this context are summarized by the author in a list of ten CSF.

Stephan (2005) concentrates on the communication and the know-how transfer within an IT offshoring project. In this context, the author identifies six key factors for the success of such a project.

The (critical) success factors mentioned in the 15 studies are, in part, very heterogeneous and not sufficiently described, allowing for a certain number of different interpretations. For this reason, we decided to compare the areas of content which are covered by the individual factors in the respective studies, rather than to compare the actual factors themselves.

Regarding the areas of content, reference can be made to the eight content categories, introduced in section 3.4. In the following, these categories are again briefly introduced (in alphabetical order) and an exemplary CSF for each category is given:

1.      Contract: Aspects related to the agreement on the project contents (e. g., “Good contract management skills”).

2.      Culture: Aspects related to cultural similarities and differences between the project partners (e. g., “Creation of cultural sensibility”).

3.      Decision: Aspects related to the selection of the provider, the project, the project location, etc. (e. g., “Selection of a modular software component”).

4.      Environment: Aspects related to political and legal regulations (e. g., “Compliance with legal regulations of the offshore destination”).

5.      Organization: Aspects related to the coordination of the project (e. g., “Scheduling of regular status meetings”).

6.      Performance: Aspects related to the controlling of the services rendered by the provider (e. g., “Implementation of benchmarks”).

7.      Relationship: Aspects related to the interaction between the project partners (e. g., “Establishment of trust between partners”).

8.      Strategy: Aspects related to the development of a vision, the setting of goals, the definition of a strategy, etc. (e. g., „Definition of a clear strategy“).

For each of the identified studies, the following table displays the distribution of the respective (critical) success factors in regard to the eight content categories listed above.

Table: Comparison of identified (critical) success factor lists in regard to their content

When comparing the content of the 15 studies, (critical) success factors in regard to the organization of an outsourcing project are reflected in all of these studies. In addition, the majority of the identified studies contain (critical) success factors regarding the performance (ten studies), the cultural differences (nine studies), as well as the relationship between the project partners (eight studies). In contrast, (critical) success factors related to the outsourcing agreement are only mentioned sporadically within the studies (three studies).

Concerning the number of (critical) success factors mentioned in the eight content categories, the category “organization” clearly leads the way (77 factors). The categories “decision” and “performance” rank second with 15 factors apiece, while the category “contract” is only addressed by four of the 148 (critical) success factors mentioned within the identified studies.

Analogous to the results of the literature review, our CSF list is dominated by the categories “organization” (13 factors) and “decision” (8 factors). However, in contrast to the identified CSF lists, our list covers all eight content categories (compare with gray highlighted row in Table 27).

In accordance with Esteves (2004), the (critical) success factors mentioned in the individual studies can also be classified and compared along the following CSF dimensions:

·        Internal vs. external factors: Is the CSF related to the client (internal factor) or is it related to the provider and the cooperation between the provider and the client respectively (external factor)? (Arce and Flynn, 1997)

·        Static vs. dynamic Factors: Does the CSF represent a characteristic or status (static factor) or does it express an activity (dynamic factor)?

·        Tactical vs. strategic factors: Is the CSF of a short- or mid-term nature (tactical factor) or is it of a long-term nature (strategic factor)? (Ward, 1990)

·        Organizational vs. technical factors: Does the CSF primarily address aspects on an organizational (organizational factor) or a technical level (technical factor)?

The total number of (critical) success factors per study and their classification into the different dimensions is displayed in the following table.

Table: Comparison of identified (critical) success factor lists in regard to different CSF dimensions

Regarding the first two dimensions (internal vs. external and static vs. dynamic factors) the total of 148 (critical) success factors mentioned within the 15 studies are equally balanced between the two corresponding dimension values. Concerning the third dimension, the tactical factors appear to have a slight edge over the strategic factors. In contrast to the first three, relatively balanced dimensions, the last dimension (organizational vs. technical factors) is clearly dominated by organizational factors.

The division of our compiled list of CSF into the four dimensions verifies the results of the literature review (compare gray marked line in the table above): While the identified CSF are relatively balanced in regard to the first three dimensions, a clear dominance of the organizational factors over the technical factors can be seen when examining the fourth dimension.

In conclusion, it can be summarized that, up to now, only little research has been carried out in regard to the CSF of OSD projects. In total, we found only four CSF studies which focus explicitly on OSD, primarily from a U.S. perspective. However, in these studies, the CSF are either insufficiently described or reflect a provider perspective. For this reason, we were not able to examine if and, if so, to what extent the CSF for U.S. clients can be transferred to German-speaking clients. In addition, with regard to the applied identification technique, it became apparent that only two of the four CSF studies rely on literature research, while only one study mentions interviews as its primary source of information. Furthermore, only one of the four studies examines the relevance of the identified CSF, and none of these studies provides a more sophisticated management analysis in regard to the proposed CSF.

References