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Hanna Lena Hertzel

Lunchtime Seminar - Contract Design Choices and the Balance of Ex Ante and Ex Post Transaction Costs in Software Development Outsourcing

Contract Design Choices and the Balance of Ex Ante and Ex Post Transaction Costs in Software Development Outsourcing
Tuesday, 22. November 2016 - 12:00 to 13:00, Leo 18

Abstract:

In his talk, Yossi Lichtenstein presents his research on Software Development outsourcing contracts that he published together with Michel Benaroch and Lior Fink in MIS Quarterly this year (Vol 40(1)). His research addresses two under-studied themes in IT outsourcing. The first is about balancing specification costs and hazard costs in drafting contracts. The second theme is the fact that contracts serve multiple functions including safeguarding, coordination and adaptability. As an introduction, he will briefly speak about the importance of IT outsourcing and give a few simple examples of contracting theory insights.

Software development is an appropriate context to study IT outsourcing because of the high cost of system specification and quality assurance and the complexity of project management. The paper portrays a nuanced picture of software development contracting and shows how contract type (Fixed-Price or Time and Materials) and contract extensiveness complement and substitute each other.  The research model is tested on 210 contracts granted by a leading international bank.

Speaker:  Yossi Lichtenstein

Dr. Yossi Lichtenstein is a research fellow at Cass Business School, City, University of London, UK. His research area is the Economics of digital technology. Currently he is studying the Web and App economies as Open Commons, namely as infrastructure managed by communities rather than by firms or governments. He has published about the contractual aspects of software development outsourcing, focusing on risks related to software's intangible and malleable nature. Dr. Lichtenstein worked for IBM Research and HP Labs and co-authored patents and research papers in the areas of Computer Aided Design and Applied Artificial Intelligence.