Offshore outsourcing of IT services to low-cost countries such as India and China has experienced tremendous growth since the 1990s; this trend is expected to continue in the near future. Among IT services, software development – because of high information intensity and little need for customer and physical presence – is one of the ideal candidates for outsourcing to offshore countries. However, software projects are notoriously difficult to manage even in conditions of co-location. Despite the risks inherent in offshore-outsourced software development (OOSD) projects, organizations in high-cost countries have come to rely increasingly on offshore outsourcing to meet their software development needs.
Software projects continue to fail despite the accumulation of knowledge over the past decades. In team-oriented activities such as software projects, a team-level study is the key to understanding failures. Using the grounded theory methodology, we explored 19 project cases of OOSD failures from the team perspective, examining both the client and the vendor sides. Project managers engaged in OOSD projects from multi-national corporations in India and Switzerland served as the key informants of this research. This research allowed us to develop exploratory insights regarding OOSD project failures, particularly regarding how indications of failure manifest themselves in the early project stages.
We analyzed failed OOSD projects with particular attention to the team level. Based on the unique team-level aspects that emerged from our study, we formulated theoretical propositions to emphasize the integration of the teams involved – client onshore, vendor onshore and vendor offshore teams – into a single project team. Our research emphasizes the importance of team members’ shared understanding of the organizational and professional cultures of onshore and offshore teams. In particular, we found that the integration of organizational work practices within the project team is of crucial importance in avoiding project failures.