Research Note - The Role of Organizational Controls and Boundary Spanning in Software Development Outsourcing: Implications for Project Performance

Past research has studied how the selection and use of control portfolios in software projects is based on environmental and task characteristics. However, little research has examined the consequences of control mode choices on project performance. This paper reports on a study that addresses this issue in the context of outsourced software projects. In addition, we propose that boundary-spanning activities between the vendor and the client enable knowledge sharing across organizational and knowledge domain boundaries. This is expected to lead to facilitation of control through specific incentives and performance norms that are suited to client needs as well as the vendor context. Therefore, we argue that boundary spanning between the vendor and client moderates the relationship between formal controls instituted by the vendor on the development team and project performance. We also hypothesize the effect of collaboration as a clan control on project performance. We examine project performance in terms of software quality and project efficiency. The research model is empirically tested in the Indian software industry setting on a sample of 96 projects. The results suggest that formal and informal control modes have a significant impact on software project outcomes, but need to be finely tuned and directed toward appropriate objectives. In addition, boundary-spanning activities significantly improve the effectiveness of formal controls. Finally, we find that collaborative culture has provided mixed benefits by enhancing quality but reducing efficiency.