Speaker(s):   Nitin Joglekar (Boston University)
Title:                  The Costs of Organizing Distributed Product Development Processes


Abstract

Many software product development (PD) projects tend to outsource a significant portion of their tasks. With PD task outsourcing, a principal PD firm typically restricts its attention to system level problem solving and coordination tasks, while the remainder development takes place in a distributed manner, within and across the boundary of the principal firm. We develop and test a set of empirical models to explore the costs of organizing distributed PD tasks using the transaction cost economics (TCE) theory. These models compare the aggregate transaction costs for two fundamentally different types of tasks that constitute a PD cycle: generation and test. We present data on 71 system level tasks from 11 software based PD projects at a medical devices firm. These data characterize the differences in the cost structure while sourcing portions of generation and test tasks. Analyses show that asset specificity - as indicated by in-house technical problem solving effort - is a significant predictor not only of the likelihood of outsourcing a portion of PD task, but also of the associated costs of coordination during generation and test. Contrary to conventional wisdom on software cost estimation, we show that with distributed development, the component level complexity - measured by outsourced problem solving effort - is not a significant predictor of the coordination costs during the development process.