Impact of IT Service Provider Process Capabilities on Service Provider ...

Proceedings of the 39th Hawaii International Conference on System Sciences - 2006

Impact of IT Service Provider Process Capabilities on Service Provider Performance: An Empirical Studyi Matthew Swinarski Black School of Business Penn State University (Erie)

Rajiv Kishore School of Management The State University of New York at Buffalo

Abstract Using the resource based view of the firm this research identifies a set of provider capabilities most likely to impact the success of an IS outsourcing relationship. These capabilities are categories into key process areas. The results presented show the effect of the routinization of these processes on four client/provider related IS outsourcing success measures.

1.

Introduction

IS outsourcing has become a multi-billion dollar industry and is forecasted to grow over the next several years. A key driver for IS outsourcing is access to worldclass IT capabilities through the IS provider (Loh et al. 1992; Poppo et al. 1998; Teng et al. 1995). A firm specializing in IT may have a distinct advantage over their non-IT counterparts in handling IT resources due to their inherent capabilities. These advantages are based on the IT firm’s ability to more efficiently and effectively acquire, develop, implement and manage IT resources and systems (Grover et al. 1993; Lacity et al. 1993; Quinn 1999). It is reasoned that an IT service provider’s experience with and knowledge of various information technologies provides them with superior ability to realize the potential of IT and achieve desired results (Gurbaxani 1996). This line of reasoning is based on two main assumptions. First, IT providers are more capable due to their access to the best skills and talents from the labor market (McFarlan et al. 1995; Slaughter et al. 1996). Second, through their experience with various customers, IT service providers have developed internal capabilities in the form of formal processes and procedures which can be deployed to provide better IT solutions (DiRomualdo et al. 1998). This research investigates the latter. IT service providers are generally able to develop a complementary set of core competencies from the variety and multitude of IT projects that they control on behalf of and perform for their clients (Levina et al. 2003).

H. Raghav Rao School of Management The State University of New York at Buffalo

However, our understanding about service provider capabilities is fairly limited; in that it is not clear what capabilities, among a multitude of IS capabilities, are important from an IS outsourcing perspective. Understanding what provider capabilities matter is important for both clients and providers. Clients would benefit by being able to better qualify, based on theses capabilities, IT providers prior to contracting services. Providers would benefit by being able to focus on developing those capabilities that really matter in generating successful IS outsourcing outcomes. Accordingly, this paper looks to make the following contributions. First, based firmly in the resource based view of the firm we identify a set of provider capabilities (in the form of routinely performed organizational processes) most likely to impact the success of IS outsourcing relationships. Second, we categorized this set of routinely performed processes into key process areas and empirically validated this categorization. And finally, we study the impact of the routinization of these process areas on client and provider related IS outsourcing success measures.

2.

Relevant Prior Literature

IS outsourcing literature often cites “access to the capabilities and experience” of the provider as one of the main reasons why firms outsource (Gurbaxani 1996; Khosrowpour et al. 1996; Quinn 1999) and that IT service provider capabilities are probably the most critical factor for success (DiRomualdo et al. 1998; McFarlan et al. 1995); however, most prior research on IS outsourcing success (DiRomualdo et al. 1998; Grover et al. 1996; Gurbaxani 1996; Lacity et al. 1998; Lacity et al. 1996; Lee et al. 1999) has predominately viewed the relationship from the perspective of client. This has resulted in a gap in the literature since it is not known what and how provider capabilities impact IS outsourcing outcomes.

0-7695-2507-5/06/$20.00 (C) 2006 IEEE

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Therefore, using the resource-based theoretical perspective this research will seek to identify and empirically test what provider capabilities lead to successful IS outsourcing relationships from both the viewpoint of the client and provider.

2.1.

Resource-Based View of the Firm

The resources based view of the firm (RVB) contends that resources are heterogeneously distributed amongst competing firms and firms gain a competitive advantage in the marketplace through their ability to effectively develop, deploy and cultivate resources that are rare, valuable, imperfectly mobile and non-substitutable (Barney 1999; Wernerfelt 1984); with such advantages being maintained because of the casual ambiguity surrounding the deployment of the resources, the timedependent factors associated with the development of the resources and the social complexities evolved in cultivating the resources (Barney 1991; Mata et al. 1995). Firm’s resources constitute both assets and capabilities; where assets are tangible or intangible inputs/outputs of a firm, and capabilities are the “repeatable patterns of actions (Wade et al. 2004, p.109),” “rooted in processes and business routines” (Ross 1996, p. 171), used to transform assets into products/services. From an IT perspective tangible assets may include hardware, software or infrastructure, and intangible assets may include technology patents or vendor relationships; where as IT capabilities include technical skills, IS managerial knowledge, IS development processes and IT vendor management (Wade et al. 2004). There have been several attempts to identify IT resources that can potentially lead to superior firm performance. Ross, Beath, and Goodhue (1996), by surveying top IT executives at 50 firms, identified three key IT assets which when effectively managed could lead to business value. Feeny and Wilcocks (1998) identified nine IT resources (capabilities) they determined were necessary for organizations to exploit the benefits of IT. Bhardwaj, Sambamurthy, and Zmud (1999) complied a set of 30 IT resources (capabilities), categorized into six dimensions, which they identified as being essential for enabling and sustaining IS innovation within an organization. Using Day’s (1994) classification of organizational capabilities, Wade and Hulland (2004) developed an IS resource topology (see Table 1) to help categorize various IT resources. Though Wade and Hulland (2004) has created an elegant typology; IS research is still in its infancy in being able to determine exactly which IS resources lead to superior firm performance. In addition, it is not universally accepted that the impact of IS resources on firm performance is a direct one; several scholars have hypothesized that the relationship maybe indirect and

contingent upon other factors (see Wade et al. 2004). Such reasoning is based in part on the concept of dynamic capabilities. Dynamic capabilities refer to the “ability to integrate, build and reconfigure internal and external competencies to address rapidly changing environments” (Teece et al. 1997, p. 516). These capabilities do not directly impact firm performance, but rather indirectly impact performance through other resources. Jarvenpaa and Liedner (1998) indicate that some IS capabilities, in many ways, exhibit the properties of dynamic capabilities. Table 1: A Typology of IS Resources (adopted from Wade et al. 2004) Outside-In Spanning Inside-Out • External • IS-business • IS Relationship partnership infrastructure Management • IS planning • IS technical and change skills • Market responsiveness management • IS development • Cost effective IS operations However, Ethiraj et al. (2005) proposed two broad sets of capabilities which they felt were critical for organizations in the software services industry (a part of the broader IS outsourcing industry): (1) client-specific capabilities and (2) software development and project management capabilities. This research will focus on the latter capabilities since only development and project management capabilities can be applied across clients (Humphrey 1989; Jalote 1997). In addition, we look to build upon the work of Ethiraj et al. (2005) by not only investigating the impact of these capabilities on firm performance in the broader context of IS outsourcing but also by identifying the underlining organizational processes associated with a provider’s IS services development and project management capabilities.

2.2.

Provider IS Services Development and Project Management Capabilities

As stated previously capabilities can be seen as stemming from the routinization of key processes within the organization. In order to identify the set of key processes necessary to generate IS development and project management capabilities we draw on the Capability Maturity Model® (CMM®)1 stream of research. The Capability Maturity Model (CMM) area is well known in software engineering but has not been used in the IS services context; therefore, a brief introduction to CMM and the reason for its selection is provided next 1 Capability Maturity Model and CMM are registered in the U.S. patent and Trademark Office

2


Research Model

The research model shown in Figure 1 is divided into three sections: external firm performance, internal firm performance and IS services development and project management capabilities of the firm. Past empirical studies on IS outsourcing have predominately measured success as the benefits achieved by the client, ignoring the service provider’s perspective. While these measures may be appropriate for studies on the success of the client’s outsourcing strategies, they are not appropriate as measures of successful interorganizational relationships (IORs) since they reflect only one party’s view. Therefore, this research measures IS outsourcing success from both an internal and external view based on the cost of quality concept (Bemowski 1992). The term cost, in the quality context, does not simply mean financial expenditure but rather includes a boarder set of factors, such as, effort expended, throughput time, delivery commitments met, and defect rates; these represent opportunity costs relevant to firm performance (Nandakumar et al. 1993). Drawing on these concepts this research organizes its outcomes variables into two external (competitive performance and failure)

H2b Internal Failure H5c Life-Cycle Routinization H6c

H6a

H6b

Prevention-Based Quality Routinization

H4a

H4b

H3b

H5a

H2c

H5b

H3a

External Failure

H1

External Competitive Performance

Exteranl Firm Performance H2a Internal Efficiency Apprasial-Based Quality Routinization

Process Management Routinization

3.

Internal Firm Performance

Capability Maturity Models. The first capability maturity model, originally developed to assist the U.S. Department of Defense in software acquisition for military avionics applications, was the Capability Maturity Model for Software (SW-CMM); developed at Carnegie Mellon University under the direction of the Software Engineering Institute (SEI). The model was originally intended as a means of factoring in the contractor's performance ability into the contract award decision-making process, but over a short period of time the SW-CMM evolved into a framework for software process improvement which has resulted in its adoption by several commercial organizations (Ethiraj et al. 2005; Harter et al. 2000a). More recently SEI developed the Capability Maturity Model® Integration for Systems Engineering/Software Engineering (CMMI-SE/SW) to provide organizations an integrated framework for enterprise-wide IT process improvement, not just software development. Given the early use of the CMM as a key tool in accessing a vendor’s capabilities and its current worldwide status as a process improvement framework, this research has selected to measure a provider’s IS services development and project management capabilities by its routinization of the CMM-SE/SW processes.

and two internal (efficiency and failure) firm performance measures encompassing both a client and provider IS outsourcing view of success.

IS Services Development & Project Management Capabilities of the Firm

(for an in-depth review of popular process maturity models including the Software Engineering Institute's Capability Maturity Model for Software see Krishnan et al.(1999b)).

Figure 1: Research Model

With respect to IS services development and project management capabilities, early research involving capability maturity models has typically shown and measured an organization’s process capabilities as a single construct (consisting of the individual processes); however, more recent research by Krishnan et al. (2000) has shown that groups of CMM processes are theoretically related, and these groups of processes have different effects on outcome performance measures. Specifically, they empirically validated a mapping of eight SW-CMM processes on to two theoretical quality management process areas (life-cycle and quality) and investigated their effects on product quality and project efficiency. Therefore, using Krishnan et al. (2000) as a guide and expanding on their work we have mapped each of the twenty-two CMMI-SE/SW processes to one of four critical activities for quality management based on the seminal work of Feigenbaum (1956). This exercise

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resulted in the process mapping presented in Table 2 (the names of the process areas have been changed to reflect the more modern terminology for these areas while the original terms have been provided in parenthesizes for continuity). It is therefore the routinization of the processes in these four areas that make up the firm’s IS services development and project management capabilities. Table 2: CMMI-SE/SW Process Mapping* Process Areas Individual Processes Appraisal-based • Product Integration quality (Product • Verification control) – processes • Validation used to inspect and • Quantitative Project Management test that products meet specifications and functions Life-cycle (New • Project Planning design control ) – • Project Monitoring and Control processes used to • Integrated Project Management plan, design and • Requirements Development engineer quality • Requirements Management products • Technical Solution Prevention-based • Configuration Management quality (Incoming • Process and Product Quality material control)) – Assurance processes used to • Measurement and Analysis inspect and ensure • Supplier Agreement Management inputs into various • Risk Management processes are of • Decision Analysis and Resolution sufficient quality • Causal Analysis and Resolution Organizational • Organizational Process Focus process • Organizational Process Definition management • Organizational Training (Process studies) – • Organizational Process processes aimed at Performance improving the quality • Organizational Innovation and of other processes Deployment *An update version of the CMMI-SE/SW (Team 2001) was released in late December 20001 and included one additional process (Integrated Teaming)

RBV includes the perspective that firms develop heterogeneous capabilities as a function of the routines and business processes they develop over time (Ethiraj et al. 2005; Ray et al. 2004). These routines represent bundles of firm specific knowledge (Nelson R.R. 1982) that are applied on a regular and predictable basis (Nelson R.R. 1982; Zollo et al. 2002; Zott 2003). Several studies on system development by IT firms (Dion 1993; Herbsleb et al. 1997; Krishnan et al. 1999a) have shown that increased levels of formalized process routines lead to improvements in product quality, customer satisfaction, productivity, cost, and cycle time. While we have provided a general overview of the research model, a more detail discussion of the individual constructs and their hypothesized relationships is provided in the following subsections.

3.1.

External Firm Performance

External firm performance consists of two related dimensions: (1) external failure (as measured by complaints, contract performance claims, and litigation claims) and (2) external competitive performance (defined by market share and repeat business). These measures capture outsourcing success from the prospective of both parties. From the client’s perspective, increases in complaints and claims, implies the service provider is not meeting contractual obligations and customers are dissatisfied with the services they are receiving; from the service provider’s perspective, this means higher cost due to a larger number of customer problems and claims. Both of these are likely to result in decreased market share and repeat business for the provider. Therefore: Hypothesis 1: External failure is negatively related to external competitive performance.

3.2.

Internal Firm Performance

As stated previously, this research divides internal performance into two distinct but related constructs: (1) internal efficiency and (2) internal failure. Internal efficiency is defined as the ability to minimize project costs and development and implementation times (Deephouse et al. 1995-1996); while internal failure measures are associated with rework and defects (Ahire et al. 2000; Nandakumar et al. 1993). The ability to efficiently produce services has a direct bearing on the price and timely delivery of these services to the customer (Ravichandran et al. 1999) and the profitability of the provider. Service providers who are more efficient can accurately predict the resources and time needed to fulfill the client’s service needs, placing themselves in a better competitive position since cost and schedule overruns become less common. Therefore: Hypothesis 2a: Internal efficiency is positively related to external competitive performance. In addition, a service provider who is able to meet functional requirements set forth in the contract is likely to endear himself to the client. Because of the difficulty in maintaining consistent outcomes in service relationships; clients are likely to establish ongoing relationships with providers that reach desired service levels (Grover et al. 1996). Higher levels of product conformance result in increased customer satisfaction (Ahire et al. 2000). However, failing to deliver services as promised will result in increased tension, ill-will and possible litigation. Therefore:

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Hypothesis 2b: Internal failure is positively related to external failure. A well established view of the quality management literature is that product quality and process efficiency are also interrelated, since increased quality tends to lead to improvements in productivity (Krishnan et al. 2000). In other words, decreasing defect rates reduces cost, effort and delivery time (Nandakumar et al. 1993). On the other hand, corrective rework actions are also associated with increased cost and schedule delays (Harter et al. 2000a). Thus, the less a product or service conforms to the requirements, the more time, money and effort is devoted to rework. The negative effect of rework on a project’s schedule and cost is further compound since rework use resources that could have been dedicated to other value added activities. In addition, there is empirical evidence to support the negative effect of rework on process efficiency (Harter et al. 2000a; Krishnan et al. 2000). Therefore: Hypothesis 2c: Internal failure is negatively related to internal efficiency.

3.3.

Appraisal-Based Quality Process Routinization

Appraisal quality processes involve inspecting and testing products and services for adherence to applicable requirements, specifications and functionality. These processes follow the traditional view of quality management where higher levels of quality are only obtainable through increased verification and validation testing. The routinization of these rigorous testing and debugging efforts can improve quality by enabling detection of defects before the final release of an IT product/service (Harter et al. 2000b). Therefore: Hypothesis 3a: Appraisal-based quality process routinization is negatively related to external failure. Though good detection procedures prevent poor quality products from reaching the customer they also create more rework; in other words, it is likely that internal failure rates will increase because of the greater ability to detect potential problems. Therefore: Hypothesis 3b: Appraisal-based quality process routinization is positively related to internal failure.

3.4.

Prevention-Based Quality Process Routinization

the work of Deming (1986) and Juran (1988). It’s a belief that quality can be built into products by improving the performance of the processes involved. By making product production more consistent, product quality will increase, and time and effort expenditures on rework will reduce (Crosby 1979). This is particularly true in system and software development, where defects detected at early stages of development lead to less corrective effort and cost than those detected at later stages (Swanson et al. 1991); thus time and effort expenditures on the routinization of quality assurance activities early in the system development life-cycle are often offset by the reduction in rework activities (Harter et al. 2000a). However, investments into these preventative activities are made upfront; initially increasing cost and effort, before the returns on such efforts are realized through reduced rework. Therefore: Hypothesis 4a: Prevention-based quality process routinization is negatively related to internal efficiency. Hypothesis 4b: Prevention-based quality process routinization is negatively related to internal failure.

3.5.

Life-cycle Process Routinization

Processes associated with life-cycle routinization involve planning, designing and engineering quality products/services. The system development literature has identified the importance of formal requirements analysis and system design techniques on achieving desired system objectives, especially in the initial phases of development (Choe 1996). When requirements are not effectively determined or system design is poor, greater amounts of rework and effort are needed during later stages of development and testing (Harter et al. 2000a). Too often inadequate requirements analysis and bad design decisions result in systems, which are difficult to modified or enhance (Banker et al. 1998). Significant portions of rework problems have been associated with poor development activities such as requirements analysis and system design (Ravichandran et al. 1999). Establishing defined requirements and development processes has been shown to decrease the number of defects (Harter et al. 2000a; Kan et al. 1994; Krishnan et al. 2000). In addition, IT service providers who are better able to capture requirements from their clients and transform them into quality products/services will achieve greater customer satisfaction. Therefore: Hypothesis 5a: Life-cycle process routinization is negatively related to external failure.

Preventative quality processes are associated with the contemporary view of quality management, pioneered by

5


Hypothesis 5b: Life-cycle process routinization is negatively related to internal failure. Life—cycle processes also involve establishing the project’s goals, scope, milestones and commitments. Project failures due to cost overruns, missed deadlines and poor quality are often the result of inadequate planning. The viability of the project plan is one of the most important determinants in meeting project targets (Deephouse et al. 1995-1996). Planning and resource allocation choices are critical in meeting established performance and quality goals (Abdel-Hamid et al. 1999). Unrealistic costs and schedules may hinder system performance and quality; as planned resources, enhancements and quality assurance activities are sacrificed to achieve project budget and time targets. Therefore, the routinization of project life-cycle control mechanisms such as project reporting are needed to help ensure beneficial outcomes in IS outsourcing arrangements (Sabherwal 1999). Milestones should be used to gage major accomplishments and provide a measure of progress for both service provider and client. Poor tracking of accomplishments can lead to cost and schedule overruns causing management to cut back the scope and scale of the planned system (Bard et al. 1993). It has been observed (Humphrey 1989) and empirically tested (Krishnan et al. 2000) that allocating sufficient resources to front-end development processes, especially design, have a positive impact on improving quality and productivity in software development efforts. Therefore: Hypothesis 5c: Life-cycle routinization is positively related to internal efficiency.

3.6.

Organizational Process Management Routinization

Organizational process management routinization involves a culture where the organization creates, coordinates, records and manages a set of standard processes that can be tailored for each individual IT service implementation. As system development efforts become more complex the need to define processes to facilitate communication between development, testing and maintenance groups becomes more pronounced (Koushik et al. 1995). The more salient and routine successful practices become, the more consistent and predictable are outcomes (Davenport et al. 1995). IT service providers which have organizational process routineness are more likely to have well defined and followed processes in the other previous mentioned process areas. Therefore, organization process management routinization could be considered a dynamic capability which indirectly effects firm performance through the routinization of the other process areas. Therefore:

Hypothesis 6a: Organizational process management routinization is positively related to appraisal-based quality process routinization. Hypothesis 6b: Organizational process management routinization is positively related to the preventionbased quality process routinization. Hypothesis 6c: Organizational process management routinization is positively related to life-cycle process routinization.

4.

Methodology

The unit of analysis for this research was at the organizational level. Given the relatively low response rates with regards to MIS survey research (Pinsonneault 1993), coupled with the fact that no single source was available to provide contact information for IT service providers; the efforts described below were taken to maximize the number of responses.

4.1.

Data Collection

The research was conducted using both paper-based and Internet-based survey methods. Data collection was done in two main phases over a 9 month period between 2002 and 2003. The first phase was targeted at large IT service providers. In an attempt to reach a large target sample, cooperation from two conferences (IT Outsourcing Conference produced by DCI and The Outsourcing Institute and ESPWorld Conference and Expo produced by IDC) and one industry organization (ASP Industry Consortium of CompTIA) was solicited. The second phase of data collection was targeted at small to medium size IT service providers using support from a regional IT professional organization and the Dean’s office in the school of management at a northeastern university. Data collection efforts generated a total of 74 responses of which 62 could be used for analysis; however, multiple responses came from two large organizations which were subsequently averaged together to produce a final set of 60 data points. Respondents had and average of 5.62 years of experience in their present organization.

4.2.

Instrument Development

Items to measure the routinization of the individual processes were based on the process definitions from the CMMI-SE/SW (Team 2000). Two measures were developed for each process. One to ascertain the extent the process was formally defined in the organization and the other to ascertain the extent the process was being used as defined. The multiplication of these two

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responses for an individual process would constitute a measure for the routinization of that process within the organization. Items for the internal and external firm performance constructs were taken from (Ahire et al. 2000) and (Deephouse et al. 1995-1996) with minor modifications in order to make them more applicable to the IS outsource context. The face validity of the survey instrument was assessed using eight respondents: two IS professionals and two IS researchers familiar with the Capability Maturity Models and two IS professionals and two IS researchers familiar with IS outsourcing. Feedback from these reviewers resulted in minor changes in the survey’s appearance and instructions.

4.3.

Controls

Three control variables were also captured: • Company size (total gross sale revenue) – larger organizations are more likely to have more formal processes to deal with communication and coordination issues. • Company experience (number of years in business) – organization with greater experience are more likely to have developed formal processes over time. • Industry classification. – capabilities needed by an organization in an IS outsourcing industry segment may vary based on the competition and other related issue within that segment. The direct effects of these control variables on all four firm performance constructs were included in the structural model.

5.

Results 5.1.

Measurement Model

An exploratory factor analysis using a varimax rotation was done on all 22 process routinization measures to validate the process mapping in Table 2. Four factors did emerge as expected; however, items with less than a 0.70 factor loading were dropped resulting in 14 retained processes: • Life-cycle process routinization (project planning, requirements development, technical solution) • Appraisal-based quality process routinization (product integration, verification, validation) • Prevention-based quality process routinization (configuration management, process and product quality assurance, measurement and analysis, causal analysis and resolution) • Organizational process management routinization (organizational process focus, organizational process

definition, organizational training, organizational innovation and deployment) A confirmatory factor analysis using AMOS 5 and following the guideline set by Chatterjee et al. (2002) for dealing with small sample sizes was done on the four process routinization constructs. Due to the small sample size we estimated two confirmatory factor models with two process routinization constructs in each model to achieve enough degrees of freedom (Chatterjee et al. 2002); with life-cycle and organizational process management routinization in one model and appraisalbased and prevention-based quality routinization in the other model. Modification indices were used to refine models. The unidimensionality of the factors was evident from the high model fit indices (GFI, AGFI, RMR, NFI, TLI, CFI, and IFI). Reliability of the constructs was calculated using Wert’s formula; all were above 0.50. Discriminant validity was performed by pair-wise comparisons of all the four constructs for the constrained and unconstrained models (12 models in all); χ2 differences were all significant (p < 0.05) for all 12 models demonstrating good discriminant validity. The same confirmatory factor analysis procedure performed on the process routinization constructs was also done on the four firm performance constructs. These constructs also demonstrated good unidimensionality, reliability and discriminant validity.

5.2.

Structural Model

The Structural Model was assessed using PLS 3 Build 1126. Since quality and productivity usually exhibit nonlinear effects, it is quite possible that these same effects may be present in the performance measures captured in our model. Thus, following Krishnan et al. (2000), we adopt a multiplicative specification. To do this, we aggregated the capability and performance items into average indices and perform a natural log transform on these indices. The PLS results from both the log transformed and untransformed models are present in Table 3.

6.

Discussion & Conclusion

Before discussing the limitation of the study, we would like to share some insights regarding the research model and results. We extended the work of Ethiraj et al. (2005) by investigating the impact of IS development and project management capabilities of providers in the broader context of IS outsourcing; we examined the impact of these capabilities on both internal and external firm performance measures (with the external measures capturing IS outsourcing success from the prospective of both client and provider); and using the CMMI-SE/SW as a guide, we identified and validated the underlining

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organizational processes associated with a provider’s IS services development and project management capabilities in the IS outsourcing context. Table 3: Summary of Results. 2

R External Competitive Performance (ECP)

LN

No LN

0.390

0.439

External Failure (EF)

0.254

0.269

Internal Efficiency (IE)

0.437

0.426

Internal Failure (IF) Appraisal-based Quality Routinization (AQR) Prevention-based Quality Routinization (PQR) Life-cycle Routinization (LCR) Organizational Process Management Routinization (OPMR) Hypothesis

0.136

0.119

0.254

0.333

0.363

0.445

0.211

0.282

NA LN

NA No LN

H1:

EF ĺ ECP

-0.558***

H2a:

IE ĺ ECP

0.027

H2b:

IF ĺ EF

0.453***

0.589***

H2c:

IF ĺ IE

-0.663***

-0.638***

H3a:

AQR ĺ EF

0.139

H3b:

AQR ĺ IF

-0.221*

-0.264*

H4a:

PQR ĺ IE

-0.295**

-0.200**

H4b:

PQR ĺ IF

-0.277^

-0.086

NS

NS

-0.580*** -0.021

0.189

NS

NS

H5a:

LCRĺ EF

-0.264*

H5b:

LCR ĺ IE

0.122

H5c:

LCR ĺ IF

0.396**

0.354**

H8a:

OPMRҏ ĺ AQR

0.503***

0.577***

H8b:

OPMR ĺ PQR

0.602***

0.667***

H8c:

OPMR ĺ LCR

0.460***

0.531***

NS

levels of rework; this is very likely given the negative impact of life-cycle process capability on external failure. We also found a significant negative relationship between appraisal-based quality process routinization and internal failure; this may be associated with the possibility that many of these organizations are utilizing a rapid development methodology, thus incurring less rework by addressing small problems early before they manifest into larger problems. There are several limitations associated with this study. First, the sample size is relatively small with 60 data points; however, another CMM based survey research study (Deephouse et al. 1995-1996) used only 87 data points for analysis. In addition, over two-thirds of IS survey research at the organization level had relatively small sample sizes (Pinsonneault 1993). Second, response rates could not be accurately determined since participants were indirectly contacted through private mailing lists held by the organizations mentioned in section 4.1; therefore, tests regarding response biases could not be conducted. However, an examination of the respondents show that approximately half of the data points in our sample came from large and well known IT service providers; therefore, it is believed that the sample is representative of the IT services industry.

7. 1)

-0.336* 0.127

NS

Notes: ^p< 0.1; * p < 0.05; ** p < 0.01; ***p