Coordination in Distributed Organizations Kannan Srikanth PhD Student Strategic and International Management Dept.

Coordination in Distributed OrganizationsKannan Srikanth

PhD Student

Strategic and International Management Dept.

ICT at the Firm Level of Analysis

How does ICT enable disaggregation of a firm’s 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 Boeing’s Moscow office, so engineers don’t 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

Thanks

Look forward to your feedback

MGJ INTRO SLIDES

How does ICT enable disaggregation of a firm’s

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

Back-UP Slides

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 failureSoftware 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 failureSoftware has bugs because employees do not account for others actions

Two firms studied

INTEGRATOR (31 projects)

PROCESS MASTER(31 Projects)

HQ Location USA India

Employees 117000 59000

Revenue USD 20.1 Billion USD 2.4 Billion

EBITDA USD 1.71Billion USD 0.83 Billion

Global Presence

60 countries 47 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 vendoremployees play key project roles, but they are all co-located

All key personnel areemployed by the vendorbut they work from both onshore and offshore locations

Both client and vendor employees play key project roles, and work from onshore and offshore locations

Yes No

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 Meeting

Live Meeting

Web-Cam

Video Conference

Voice Mail

BANDWIDTHLow

SYNCHRONY

Low

High

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

ANTICIPATION INTERPRETATIONCOMMON GROUND EFFECTS

Coordinated Action across locations

Procedural Cross-contextual InterpersonalTYPES OFCOMMON 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

CommonGround

Anticipation Effect

PLAN

CommunicationICT 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