article

From offshore outsourcing to insourcing and partnerships: four failed outsourcing attempts

Authors:

Nils Brede Moe,

Geir Kjetil Hanssen,

Hamish BarneyAuthors Info & Claims

Empirical Software Engineering, Volume 19, Issue 5

Pages 1225 - 1258

https://doi.org/10.1007/s10664-013-9272-x

Published: 01 October 2014 Publication History

Abstract

Most large software companies are involved in offshore development, now small- and medium-sized companies are starting to undertake global sourcing too. Empirical research suggests that offshoring is not always successful; however, only a few comprehensive failure stories have been reported. The objective of our study has been to understand why small and medium-sized companies terminate their offshore outsourcing relationships and what alternative arrangements they undertake afterwards. Therefore, we designed a multiple case study of four medium-sized Scandinavian software companies that have terminated their offshore outsourcing relationships. Our results are based on data collected through semi-structured interviews, informal dialogues and analysis of company documents. We found that all companies terminated their offshore contracts because of low quality of the software being developed. This was caused by an inability to build the necessary human and social capital. The companies reported challenges with domain knowledge, a lack of commitment of external developers, cultural clashes, poor communication and high turnover, which only amplified the problems. After termination all four companies changed their sourcing strategy from offshore outsourcing to offshore insourcing and partnerships. We conclude that successful offshore software development requires a change from a cost-driven focus to an intellectual capital-driven focus. To prevent continuous investments into contracts that are destined to fail, companies should look for signs of escalating commitments and terminate relationships that cannot be corrected. Those companies that choose outsourcing shall also take into account that mismatch between the size of the offshore contract relative to the vendor may have a negative effect on a relationship.

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Cited By

Moe NStray VGoplen MLi JJaccheri LDingsøyr TChitchyan R(2020)Studying Onboarding in Distributed Software TeamsProceedings of the 24th International Conference on Evaluation and Assessment in Software Engineering10.1145/3383219.3383235(150-159)Online publication date: 15-Apr-2020
https://dl.acm.org/doi/10.1145/3383219.3383235
Smite DMoe NKrekling TStray VCalefato FTell PDubey A(2019)Offshore outsourcing costsProceedings of the 14th International Conference on Global Software Engineering10.1109/ICGSE.2019.000-8(40-47)Online publication date: 25-May-2019
https://dl.acm.org/doi/10.1109/ICGSE.2019.000-8
Chatzipetrou PŠmite Dvan Solingen ROivo MMéndez DMockus A(2018)When and who leaves mattersProceedings of the 12th ACM/IEEE International Symposium on Empirical Software Engineering and Measurement10.1145/3239235.3267431(1-4)Online publication date: 11-Oct-2018
https://dl.acm.org/doi/10.1145/3239235.3267431
Show More Cited By

From offshore outsourcing to insourcing and partnerships: four failed outsourcing attempts
1. Social and professional topics
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    1. Management of computing and information systems

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cover image Empirical Software Engineering

Empirical Software Engineering Volume 19, Issue 5

October 2014

336 pages

ISSN:1382-3256

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Copyright © Copyright © 2014 Springer Science+Business Media New York.

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Kluwer Academic Publishers

United States

Publication History

Published: 01 October 2014

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Cited By

Moe NStray VGoplen MLi JJaccheri LDingsøyr TChitchyan R(2020)Studying Onboarding in Distributed Software TeamsProceedings of the 24th International Conference on Evaluation and Assessment in Software Engineering10.1145/3383219.3383235(150-159)Online publication date: 15-Apr-2020
https://dl.acm.org/doi/10.1145/3383219.3383235
Smite DMoe NKrekling TStray VCalefato FTell PDubey A(2019)Offshore outsourcing costsProceedings of the 14th International Conference on Global Software Engineering10.1109/ICGSE.2019.000-8(40-47)Online publication date: 25-May-2019
https://dl.acm.org/doi/10.1109/ICGSE.2019.000-8
Chatzipetrou PŠmite Dvan Solingen ROivo MMéndez DMockus A(2018)When and who leaves mattersProceedings of the 12th ACM/IEEE International Symposium on Empirical Software Engineering and Measurement10.1145/3239235.3267431(1-4)Online publication date: 11-Oct-2018
https://dl.acm.org/doi/10.1145/3239235.3267431
Duc AAbrahamsson PMendes ECounsell SPetersen K(2017)Exploring the outsourcing relationship in software startupsProceedings of the 21st International Conference on Evaluation and Assessment in Software Engineering10.1145/3084226.3084248(134-143)Online publication date: 15-Jun-2017
https://dl.acm.org/doi/10.1145/3084226.3084248
Dhillon GSyed RS-Soares F(2017)Information security concerns in IT outsourcingInformation and Management10.1016/j.im.2016.10.00254:4(452-464)Online publication date: 1-Jun-2017
https://dl.acm.org/doi/10.1016/j.im.2016.10.002
Bass J(2016)Large-Scale Offshore Agile TailoringProceedings of the Scientific Workshop Proceedings of XP201610.1145/2962695.2962703(1-5)Online publication date: 24-May-2016
https://dl.acm.org/doi/10.1145/2962695.2962703
Ali SKhan S(2016)Software outsourcing partnership modelJournal of Systems and Software10.1016/j.jss.2016.03.069117:C(402-425)Online publication date: 1-Jul-2016
https://dl.acm.org/doi/10.1016/j.jss.2016.03.069
CACM Staff (2015)Human or machine?Communications of the ACM10.1145/274024358:4(8-9)Online publication date: 23-Mar-2015
https://dl.acm.org/doi/10.1145/2740243
Wohlin CŠmite DMoe N(2015)A general theory of software engineeringJournal of Systems and Software10.1016/j.jss.2015.08.009109:C(229-242)Online publication date: 1-Nov-2015
https://dl.acm.org/doi/10.1016/j.jss.2015.08.009

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