GLOBALISATION IN INFORMATION TECHNOLOGY: THE IMPACT OF IS OFFSHORING BRIAN GANNON School of Computer Science and Information Systems Birkbeck College, University of London University of London, Malet Street, London WC1E 7HX October 2009 Dissertation submitted in fulfilment of the requirements for the award of the degree of Doctor of Philosophy in the faculty of Computer Science at the University of London Page 1 Declaration of Authorship I certify that the work presented here is, to the best of my knowledge and belief, original and the result of my own investigations, except as acknowledged, and has not been submitted, either in part or whole, for a degree at this or any other University. Brian Gannon Date: 21 October 2009 Page 2 Abstract This research is about the phenomenon of IS offshoring, which involves distributed software development, defined as occurring when teams of geographically dispersed individuals work as part of a global virtual team across national boundaries. The research identifies the phenomenon as an aspect of globalisation, enabled by availability of skilled resources in offshore locations (where the cost of labour is relatively low), and affordable high-speed telecommunications services in these locations. The research develops explanatory theories for aspects of offshoring, commenting on its impact on IS organisations and practitioners, both onshore and offshore. For IS organisations, it concludes that while the cultural, organisational and operational impacts of offshoring are low, the economic impact is significant and is leading to the emergence of the modern heterarchy, a new form of multi-national enterprise (MNE). Both onshore and offshore IS organisations are adopting this organisational form as their strategic intentions converge. For IS practitioners, the cultural, organisational and operational impacts are similarly muted. The economic impact is more pronounced for offshore IS practitioners, with direct evidence of increased reward and opportunity. The economic impact of offshoring on onshore IS practitioners is less conclusive; although the research highlights a rebalancing of IS skills between onshore and offshore locations. The research adopts an interpretive and qualitative research paradigm, and uses grounded theory techniques to analyse the data and develop theory. Two projects from the financial services industry in the UK, conducted by Capgemini, are used to provide empirical data. Page 3 Acknowledgements The author acknowledges the help and assistance provided by the many individuals who have contributed to the preparation, execution and presentation of this thesis, particularly those who consented to be interviewed as part of the work. A further acknowledgement is made of the extensive and valuable advice provided to the author by Dr. David Wilson of Birkbeck College, University of London, who supervised this thesis. Page 4 List of Tables and Figures Table 3.3 Taxonomy of theory types in IS research (Gregor, 2006) Figure 4.5 a) Organisations involved in project Mars onshore and offshore Figure 4.5 b) Organisations involved in project Europa onshore and offshore Table 4.5 c) Comparing risk categories for the Mars and Europa projects Figure 5.2 Research Plan Table 5.4 a) Initial analytic framework resulting from open coding Table 5.4 b) Refined analytic framework after axial coding Figure 5.5 Progression from data to theory Table 8.2 a) Summary of impact of offshoring at the organisational level Table 8.2 b) Summary of impact of offshoring at the practitioner level Figure 8.3 Example of a simple maturity S-curve for offshore IS organisations Table 8.5 Comparing risk categories for generic onshore and offshore projects Page 5 Contents Declaration of Authorship ........................................................................................ 2 Abstract ..................................................................................................................... 3 Acknowledgements................................................................................................... 4 List of Tables and Figures ........................................................................................ 5 1 MOTIVATIONS AND SCOPE OF THE RESEARCH ............................................ 9 1.1 An introduction to the research ......................................................................... 9 1.2 Nature and scope of the research ..................................................................... 11 1.3 Context and domain of research ...................................................................... 12 1.4 Definitions of terms used in the research ........................................................ 14 1.5 Motivations for the research ............................................................................ 22 1.6 The structure of this thesis ............................................................................... 27 2 LITERATURE REVIEW .......................................................................................... 29 2.1 Introduction ..................................................................................................... 29 2.2 A short history of IS sourcing.......................................................................... 30 2.3 Literature on IS outsourcing ............................................................................ 36 2.4 Literature on IS offshoring .............................................................................. 38 2.5 Literature on globalisation and the multinational enterprise ........................... 42 2.6 Literature on IS organisations and maturity models ........................................ 53 2.7 Deficiencies of currently published research ................................................... 55 2.8 Conclusion ....................................................................................................... 58 3 THEORY AND RESEARCH METHOD ................................................................. 60 3.1 Introduction ..................................................................................................... 60 3.2 The relationship between theory and research paradigm ................................ 61 3.3 Aspects of theory ............................................................................................. 63 3.4 Ontology, epistemology and research paradigms ............................................ 65 3.5 Choosing a research paradigm ......................................................................... 71 3.6 Choosing a Grounded Theory research method .............................................. 75 4 EMPIRICAL MATERIAL ........................................................................................ 82 4.1 Introduction ..................................................................................................... 82 4.2 The multi-shore systems integrator – Capgemini ............................................ 83 4.3 The Mars project narrative .............................................................................. 86 Page 6 4.4 The Europa project narrative ........................................................................... 91 4.5 Outcomes of project Mars and project Europa .............................................. 102 4.6 Conclusion ..................................................................................................... 107 5 DATA ANALYSIS .................................................................................................... 109 5.1 Introduction ................................................................................................... 109 5.2 Research planning ......................................................................................... 109 5.3 Data collection ............................................................................................... 111 5.4 Data analysis .................................................................................................. 114 5.5 From data to theory ....................................................................................... 121 5.6 Commentary on methods, tools and techniques ............................................ 123 6 THE IMPACT OF OFFSHORING ON IS ORGANISATIONS .......................... 126 6.1 Introduction ................................................................................................... 126 6.2 Cultural impact .............................................................................................. 127 6.3 Economic impact ........................................................................................... 132 6.4 Organisational/skills impact .......................................................................... 137 6.5 Operational impact ........................................................................................ 139 6.6 Conclusion ..................................................................................................... 141 7 THE IMPACT OF OFFSHORING ON IS PRACTITIONERS .......................... 142 7.1 Introduction ................................................................................................... 142 7.2 Cultural impact .............................................................................................. 143 7.3 Economic impact ........................................................................................... 149 7.4 Organisational/skills impact .........................................................................