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ECIS
2003

Pricing software development services

11 years 9 months ago
Pricing software development services
This paper studies the pricing of software development outsourcing. Two pricing techniques – time and material and fixed price – are described and the economic conditions for selecting between them are discussed. Using agency theory and transaction cost economics, it is predicted that risky and specific systems will be priced on time and material basis while other projects will be fixed price. An additional prediction is that confidence in the vendor’s auditing of resources is essential for time and material contracts. The predictions are tested on fourteen external software development projects in two large corporations. Quantitative measures of risk, specificity and confidence are utilised, but the data-set does not support the theoretical predictions. In order to explain this result, interviews with senior managers at the two corporations have been conducted. Both disagree with the theoretical prescriptions: one contracts risky projects on fixed price basis, preferring to pay...
Yossi Lichtenstein, Alan McDonnell
Added 31 Oct 2010
Updated 31 Oct 2010
Type Conference
Year 2003
Where ECIS
Authors Yossi Lichtenstein, Alan McDonnell
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