Coordination in Distributed Organizations Kannan Srikanth PhD Student Strategic and International Management Dept.
ICT at the Firm Level of Analysis How does ICT enable disaggregation of a firms activities? Disaggregation of activities along two dimensions –Geography – Activities performed across several geographic locations –Ownership – Activities performed across several firms
Null Hypotheses Disaggregation across geographies –Digitization of information leading to easy transfer across locations –Increased bandwidth and ICT tools leading to cheap communication across locations Unbundling across firm boundaries –Standardization of information and simplification of coordination are primary drivers
Research Study Business Process Outsourcing –Variation in activities spread both across geographies as well as across firm boundaries –Innovative, hard to standardize, coordination intensive processes are both offshored and outsourced Qualitative study of coordination in offshore software services delivery –Main emphasis of study is on geographic dispersion –Interviews with managers for 40 projects Joint Work with Phanish Puranam
Distributed Vs. Co-located Projects Size, Complexity: –Distributed projects > Co-located projects Performance: –Distributed projects = Co-located projects Project disasters as likely to occur in co-located projects as in distributed projects How do firms leverage ICT to coordinate complex non-standardized and highly interdependent activities across geographies?
Coordination by ICT Complex patterns of interdependence likely to need frequent and rich interactions –Typically achieved by face-to-face communication Use of Rich ICT in distributed projects –Boeing has set up a 24-hour work day where they just pass their designs back and forth from Moscow to America …There are video-conferencing facilities on every floor of Boeings Moscow office, so engineers dont have to rely on email when they have a problem to solve with their American counterparts. They can have a face-to-face conversation (Friedman, 2005; p 195). [our emphasis]
Communication by Rich ICT is unimportant Software projects do not seem to use anything more than Email, telephone –Only 6 of 27 projects used rich media – NET Meeting or Live Meeting –No Project used video conferencing (VC) New technologies are both familiar and available –Software professionals are likely to be expert users in these technologies –Technologies readily available
What ICT is actually used? Configuration Management Tools –Version control managers (e.g. PVCS) Common Development Environment –Shared repositories for documents, code (e.g. shared drives) –Common Development tool kits (e.g. Mercury) Communication Tools –Email, Telephone ICT tools are more important to provide a shared view of what is happening in all locations rather than for communication between locations
How does ICT achieve coordination of geographically dispersed activities? Not by allowing frequent communication among the employees in different locations But by allowing employees in each location a window to view and observe the actions taken by those in other locations ICT is important to generate cross-contextual common ground
ICT and Firm boundaries Between firm coordination is very different from within firm coordination: –Firms rely to a large extent on face-to-face communication to coordinate between firms –Frequently firms co-locate to coordinate low levels of interdependence across firm boundaries when they routinely coordinate much higher levels of interdependence within firm boundaries but across locations with little need for rich communication Why is ICT ineffective across firm boundaries though highly effective within?
Effect of Firm Boundaries Coordination in distributed software projects occurs mainly by common ground Firms are able to leverage pre-existing common ground within their boundaries but not across ICT generates common ground in real-time –But is not enough on its own –Needs common ground generated by authority and socialization that is available only within firms
Implications - I ICT vital to disaggregate activities across distance –But not the kind we thought was important –Shared context is more important than ability to communicate –Supports research by Billinger and Jacobides (2005) Firms should pay attention to context building ICT –E.g. investing in video-conferencing alone will not make offshoring work Policy holders should be aware of technological and regulatory issues that prevent such cross-contextual knowledge from forming
Implications - II ICT alone is not enough to unbundle across firms –When standardization of information is not possible coordination becomes very tedious For non-standard or innovative work, co-located supplier relationships needed for Face-to-Face communication –Cannot rely on a faceless market –Supports research by Jacobides (2005) Firms and policy makers should be aware that some types of work inescapably require face-to-face contact
How does ICT enable disaggregation of a firms activities? Disaggregation is along two dimensions –Across geographic locations and across firm boundaries How do firms leverage ICT along these two dimensions? –Are the drivers along both dimensions the same (or at least similar?) BPO - Wonderful natural experiment –Offers variation across both for a wide range of processes –Allows a micro level of analysis by looking at discrete activities
ICT and Geographic Dispersion Qualitative research study on offshore software services delivery –Involves complex, non-standardized and coordination intensive work that s done across both geographies and firm boundaries ICT vital to geographic dispersion of activities –Coordination enabled by IT tools that create cross- contextual common ground –Communication tools much less important than previously thought
ICT and Firm Boundaries IT much less effective in coordinating activities across firm boundaries as it is across locations Firms frequently co-locate because of the need for face- to-face communication –Even when much higher levels of interdependence are coordinated within the firm, but across geographic distance Coordination occurs by common ground –ICT generates one type of common ground –That is insufficient to coordinate across firms without other types of common ground that are generated primarily within firms
Offshoring - 2000 Working on a software project in 2000 –Distributed between Hawaii and California –Coordination was a disaster –We had to hire developers in Hawaii My firm tried to use developers from India in another project in Wisconsin –The consensus among us was this will never work
Coordination Coordination is the alignment of expectations (reciprocal predictability of actions) among interdependent actors Cooperation is the alignment of interests (Heath and Satudenmayer, 2000; Camerer, 2003; GLP, 2005)
Coordination Vs. Cooperation Failure Interdependencies are well managed (software developed with minimum rework) Cooperation failure Software has errors because employees are not working hard enough Example: Coordination did not occur if defects in software are because a developer coded one module without realizing its impact on other modules Coordination failure Software has bugs because employees do not account for others actions
Two firms studied INTEGRATOR (31 projects) PROCESS MASTER (31 Projects) HQ Location USAIndia Employees 11700059000 Revenue USD 20.1 BillionUSD 2.4 Billion EBITDA USD 1.71BillionUSD 0.83 Billion Global Presence 60 countries47 countries Process Maturity Variable (CMM level 1-5 in different offices) Mature (CMMi Level 5 enterprise-wide)
Sampling Strategy All key personnel are Co-located and are employed by the vendor Both client and vendor employees play key project roles, but they are all co-located All key personnel are employed by the vendor but they work from both onshore and offshore locations Both client and vendor employees play key project roles, and work from onshore and offshore locations YesNo Yes No All Personnel Co-located? Personnel belong to same firm? (7)(14) (6)(13) 22 more projects to be used as replication sample
Architecture – Modularity Strategy Pre-Planned Modular code architectures are unimportant 24 of 27 distributed projects have high interdependence between locations Managers are unable design low interdependence between locations because of: –Legacy considerations –System landscape considerations –Client dictates architecture New York City Bangalore, India Coders in both New York and India work on the same code modules
Expected Use of Rich ICT Face–to-Face communication Instant Messenger Email Telephone Conversation NET MeetingLive Meeting Web-Cam Video Conference Voice Mail BANDWIDTH Low SYNCHRONY Low High (Web-Cam + IM)
Communication is meagre Even communication using poor media between locations seems to be quite low –People do not pick up the phone and talk to their counterparts as often as one expects Communication in many instances is scripted –The approximate time of communications, the participants, the agenda, etc. is mainly scripted –The developers [across locations] just did not communicate whenever they have doubts or problems – at certain pre-specified milestones, they have to share certain documents and communicate. The communication at this meeting is not ad-hoc, they have to talk about certain things.
Study 1 – How Coordination by Common Ground Occurs TOOLS TO CREATE COMMON GROUND ANTICIPATIONINTERPRETATION COMMON GROUND EFFECTS Coordinated Action across locations ProceduralCross-contextualInterpersonal TYPES OF COMMON GROUND Prior Experience Real time Technological Tools Rotation between locations CompensatorDesigned Uniform Processes
Study 1 – We Find Coordination by Common Ground Rich ICT tools FEEDBACK Distributed Software Projects Modularity used: Locations are Not interdependent Coordinated Action Locations are interdependent Poor ICT tools Interpretation Effect Common Ground Anticipation Effect PLAN Communication ICT Tools help generate cross- contextual common ground
Conclusions Coordination in distributed software services may depend less on modularity or communication based strategies…. But more on common ground across locations –These include common approaches (rather than solutions) to problems, knowledge about the context faced by personnel in other locations and each others idiosyncrasies The relevant ICT in such situations are tools that allow for building cross-contextual common ground across locations –Not those that allow for communication across locations –An emphasis on providing rich media might be misplaced