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Contracts in Offshore Software Development: An Empirical Analysis

Author

Listed:
  • Anandasivam Gopal

    () (Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742)

  • Konduru Sivaramakrishnan

    () (Bauer College of Business, University of Houston, Houston, Texas 77204)

  • M. S. Krishnan

    () (University of Michigan Business School, University of Michigan, Ann Arbor, Michigan 48109)

  • Tridas Mukhopadhyay

    () (Graduate School of Industrial Administration, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

Abstract

We study the determinants of contract choice in offshore software development projects and examine how the choice of contract and other factors in the project affect project profits accruing to the software vendor. Using data collected on 93 offshore projects from a leading Indian software vendor, we provide evidence that specific vendor-, client-, and project-related characteristics such as requirement uncertainty, project team size, and resource shortage significantly explain contract choice in these projects. Our analysis suggests that contract choice significantly determines project profit. Additionally, some ex ante vendor-, client-, and project-related characteristics known at the time of choosing the contract continue to significantly influence project profits after controlling for contract choice. We also provide evidence to show that project duration and team size affect project profits.

Suggested Citation

  • Anandasivam Gopal & Konduru Sivaramakrishnan & M. S. Krishnan & Tridas Mukhopadhyay, 2003. "Contracts in Offshore Software Development: An Empirical Analysis," Management Science, INFORMS, vol. 49(12), pages 1671-1683, December.
  • Handle: RePEc:inm:ormnsc:v:49:y:2003:i:12:p:1671-1683
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    File URL: http://dx.doi.org/10.1287/mnsc.49.12.1671.25120
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    References listed on IDEAS

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    8. Abhijit V. Banerjee & Esther Duflo, 2000. "Reputation Effects and the Limits of Contracting: A Study of the Indian Software Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 989-1017.
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    Citations

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    Cited by:

    1. Benoit A. Aubert & Jean Francois Houde & Suzanne Rivard & Michel Patry, 0. "Determinants of contract completeness for information technology outsourcing," Information Technology and Management, Springer, vol. 0, pages 1-16.
    2. Willcocks, Leslie P. & Oshri, Ilan & Kotlarsky, Julia & Rottman, Joseph W., 2011. "Outsourcing and offshoring engineering projects: understanding the value, sourcing models, and coordination practices," LSE Research Online Documents on Economics 39644, London School of Economics and Political Science, LSE Library.
    3. O. Zeynep Akc{s}in & Francis de Véricourt & Fikri Karaesmen, 2008. "Call Center Outsourcing Contract Analysis and Choice," Management Science, INFORMS, vol. 54(2), pages 354-368, February.
    4. Gerbl, Martina & McIvor, Ronan & Loane, Sharon & Humphreys, Paul, 2015. "A multi-theory approach to understanding the business process outsourcing decision," Journal of World Business, Elsevier, vol. 50(3), pages 505-518.
    5. Oh, Sechan & Rhodes, James & Strong, Ray, 2016. "Impact of cost uncertainty on pricing decisions under risk aversion," European Journal of Operational Research, Elsevier, vol. 253(1), pages 144-153.
    6. Joan Rhodes & Peter Lok & Wilson Loh & Vincent Cheng, 2016. "Critical success factors in relationship management for services outsourcing," Service Business, Springer;Pan-Pacific Business Association, vol. 10(1), pages 59-86, March.
    7. repec:spr:infosf:v:10:y:2008:i:2:d:10.1007_s10796-007-9061-4 is not listed on IDEAS
    8. Hirnle, Christoph & Hess, Thomas, 2005. "Bewertung unternehmens√ľbergreifender IT Investitionen in Unternehmensnetzwerken: Ein Property-Rights basierter Zugang," Working Papers 4/2005, University of Munich, Munich School of Management, Institute for Information Systems and New Media.
    9. repec:bla:jscmgt:v:53:y:2017:i:3:p:60-75 is not listed on IDEAS
    10. repec:spr:infosf:v:10:y:2008:i:2:d:10.1007_s10796-008-9068-5 is not listed on IDEAS
    11. repec:spr:infotm:v:18:y:2017:i:4:d:10.1007_s10799-016-0265-5 is not listed on IDEAS
    12. Mingfeng Lin & Siva Viswanathan & Ritu Agarwal, 2010. "An Empirical Study of Online Software Outsourcing: Signals under Different Contract Regimes," Working Papers 10-22, NET Institute.
    13. Guillaume Roels & Uday S. Karmarkar & Scott Carr, 2010. "Contracting for Collaborative Services," Management Science, INFORMS, vol. 56(5), pages 849-863, May.
    14. Jose A. Guajardo & Morris A. Cohen & Sang-Hyun Kim & Serguei Netessine, 2012. "Impact of Performance-Based Contracting on Product Reliability: An Empirical Analysis," Management Science, INFORMS, vol. 58(5), pages 961-979, May.
    15. Schmeisser, Bjoern, 2013. "A Systematic Review of Literature on Offshoring of Value Chain Activities," Journal of International Management, Elsevier, vol. 19(4), pages 390-406.
    16. Zhu, Xiaowei, 2016. "Managing the risks of outsourcing: Time, quality and correlated costs," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 90(C), pages 121-133.

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