Barriers in the selection of offshore software development outsourcing vendors: An exploratory study using a systematic literature review

Abstract

Context

Software development outsourcing is a contract-based relationship between client and vendor organisations in which a client contracts out all or part of its software development activities to a vendor, who provides agreed services for remuneration.

Objective

The objective is to identify various barriers that have a negative impact on software outsourcing clients in the selection process of offshore software development outsourcing vendors.

Method

We have performed a systematic literature review (SLR) process for the identification of barriers. We have performed all the SLR steps such as the protocol development, initial selection, final selection, quality assessment, data extraction and data synthesis.

Results

We have identified barriers such as ‘language and cultural barriers’, ‘country instability’, ‘lack of project management’, ‘lack of protection for intellectual property rights’ and ‘lack of technical capability’ that generally have a negative impact on outsourcing clients. We have identified only one common frequently cited barrier in three types of organisations (i.e. small, medium and large) which is ‘language and cultural barriers’. We did not identify any common frequently cited barrier in three continents (Asia, North America and Europe) and in two decades (1990–1999 and 2000–mid 2008). The results also reveal the similarities and differences in the barriers identified through different study strategies.

Conclusions

Vendors should address frequently cited barriers such as ‘language and cultural barriers’, ‘country instability’, ‘lack of project management’, ‘lack of protection for intellectual property rights’ and ‘lack of technical capability’ in order to compete in the offshore outsourcing business.

Introduction

Software outsourcing is a modern software engineering paradigm in the context of global software development [25]. Many companies are adopting the Global Software Development (GSD) domain to reduce software development cost [17]. Vendor organisations are struggling to compete internationally in attracting outsourced software development projects. Due to the increasing trend of GSD we are interested to discover which barriers have a negative impact on the software development outsourcing clients in the selection of offshore software development outsourcing vendors. This paper presents an exploratory study in which a systematic literature review (SLR) [22] is conducted in order to identify these barriers. Identifying these barriers will assist software development outsourcing vendors in addressing those barriers in order to be ready for software development outsourcing initiatives. Our long term research goal is to provide software development outsourcing practitioners with a body of knowledge that can help them to improve GSD processes.

In order to reduce development cost, offshore software development outsourcing has become an important process of GSD. Software development outsourcing is a contract-based relationship between client and vendor organisations in which a client contracts out all or part of its software development activities to a vendor, who provides agreed services for remuneration [1], [18]. Over the last decade, many firms in the US and UK have outsourced software development projects to offshore countries [42]. There are many reasons for software development outsourcing [6]. Client organisations benefit from offshore outsourcing because vendors in developing countries (offshore vendors) usually cost one-third less than onshore vendors [28]. It is professed that offshoring vendors can add significant value to their clients’ supply chains [44]. However, in addition to the outsourcing benefits there are many risks in an outsourcing process [9], [13].

Many problems have been reported in the offshore software outsourcing process. One of the key challenges is to handle complex communication and co-ordination problems in conditions of time and cultural separation [3], [10], [13], [42]. Other challenges are to develop software development outsourcing practices, creating confidence and trust among the outsourcing companies and to manage the expectations of what can and what cannot be done in a distributed setting [7], [12], [31], [38], [41], [42], [46]. However, despite the importance of offshore software development outsourcing, little empirical research has been carried out on offshore software development outsourcing practices in general and identification of barriers that have a significant impact on client organisations in particular. To do this we intend to address the following research questions:

• RQ1. What barriers within a software outsourcing vendor organisations have a negative impact on software outsourcing clients?

• RQ2. Do the identified barriers vary from continent to continent?

• RQ3. How are these barriers related to the size of organisations?

• RQ4. How are these barriers related to the study strategies used?

• RQ5. Do the identified barriers vary from decade to decade?

By a negative impact we mean extent to which a certain barrier is perceived by practitioners as having an influence on the clients to avoid an outsourcing vendor.

Due to the space restriction in the APSEC 2009, previously we have published only two analyses from our SLR data [21]. This paper is a revised and substantially extended version in which we present findings from our SLR data about the barriers interrupting clients in the selection of offshore software outsourcing vendors. In this paper each barrier analysed and discussed with a detailed description of the research methodology used. In addition, statistical analysis has been performed in comparing barriers identified in two decades and by small, medium and large-sized organisations. Our long term research goal is to provide software development outsourcing practitioners with a body of knowledge that can help them to design and implement successful outsourcing initiatives.

This paper is organised as follows. Section 2 describes the background. Section 3 describes the research methodology. In Section 4 findings from the systematic literature review are presented and analysed with some discussion. In Section 5 overall summary and discussion is provided. Section 6 describes the limitations whereas Section 7 provides the conclusion and future work.