Managing Outsourced Software Projects: An Analysis of Project Performance and Customer Satisfaction

Abstract

We examine the drivers of project performance and customer satisfaction in outsourced software projects using a proprietary panel dataset. The data cover 822 customer observations related to 182 unique projects executed by an India-based software services vendor. Adopting a multidisciplinary perspective, we investigate how project planning, team stability, and communication effectiveness (antecedent variables) impact project performance and customer satisfaction. We delineate the direct and interactive influences of the antecedent variables. We also examine how these influences are moderated by two important project contexts: (a) the nature of software work (Maintenance & Development versus Testing projects) and (b) project maturity (New versus Mature projects). Among other results, we demonstrate that when project planning capabilities are high, the positive impact of team stability and communication effectiveness on project performance is even higher. In addition, our results suggest that the impact of communication on project performance is muted when team stability is high. Finally, we also demonstrate that the impact of the antecedent variables on project performance varies with the nature of software work. Our findings offer specific and actionable insights to managers that can help them manage outsourced projects better, and open up new research perspectives in the context of outsourced project management.

Keywords: Outsourcing, Software Projects, Project planning, Customer Satisfaction, Operations Management