ischannel volume 6, issue 2 (special issue)

iSCHANNEL

Volume 6Issue 2 (Special Issue) December 2011

Faculty EditorDr. Will Venters

Editor-In-ChiefAttila Marton

Special ThanksProf. Chrisanthi Avgerou

Lay-Out DesignShannon Spanhake

Contents Page

From the Faculty EditorWill Venters 2

EditorialAttila Marton 3

Preparing for Technology-Related Organizational Change An Activity-Theoretical PerspectiveAlexandre Koloskov 4

Ten Red Balloons: Virtual Teams and Online CommunitiesA Test of Media Synchronicity TheoryDavid Randall 13

Newspaper Business Model Innovation from the Perspective of Information SystemsUtilizing Commercial Content and Mobile DevicesKyle Hoback 22

Systems Thinking and Inter-Organizational Information SystemsLessons from the Financial CrisisMariya Dimova 31

IT Offshore OutsourcingAn Institutional Approach on Vendor Practices in Sri LankaNadeesha S. Nanayakkara 40

iSCHANNEL is available in PDF athttp://is.lse.ac.uk/ischannelyou can also join us on facebook or follow us on twitter

ContactDr. Will VentersInformation Systems and Innovation GroupDepartment of ManagementLondon School of Economics and Political ScienceHoughton StreetLondon WC2A 2AEEmail: [email protected]

Sponsored byThe Information Systems and Innovation Group

Department of ManagementLondon School of Economics and Political Science

ISSN 2042-5686 (Online)

EDITORIAL

From the Faculty Editor

This is our first special issue. When the iSCHANNEL began we were uncertain that we would be able to pro-duce a single edition. Now in its sixth year the journal has gone from strength to strength growing in stature, importance and quality. This special issue continues this trajectory by featuring work from our Alumni based on their dissertations. Whereas previous editions have mostly carried either literature reviews or opinion pieces, this special edition includes original research. We intend to develop this link with our Alumni into future editions – with the inclusion of dissertation based articles and PhD student contributions within the regular edition.

Making this happen is not easy. I must therefore pay tribute to the incredible work put in by this years edi-tors – and in particular Attila Marton who has driven this process and undertaken lots of the work. Without the commitment of this team we would have no iSCHANNEL.

Best wishes

Dr. Will VentersFaculty Editor

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iSCHANNEL

EDITORIAL

The iSCHANNEL is going through a stage of transi-tion. Starting with the redesign of the logo and lay-out of the journal last year, we are now introducing our first special issue. Up until today, the iSCHAN-NEL appeared only once a year publishing papers written by students who were still in the middle of their studies at the Information Systems and Inno-vation Group. Not having the possibility to show-case the level of knowledge and analytic abilities they reached throughout their entire studies was a missed opportunity we aim to remedy. This special issue may be the first step, as we invited exceptional graduates from last year to submit a paper based on their final dissertation. The call was well received and the numerous submissions gave testimony to the close bond that exists between the students and the group even after the graduation.

The journal begins with a classical topic on the re-lationship between the implementation of new in-formation technologies and organizational change. Based on Activity Theory, Alexandre Koloskov, however, analyses the role an information system plays within an organization before it is being im-plemented. Hence, he delves into the domain of or-ganizing visions and expectations with respect to a technology that is yet invisible to its future users. He concludes with a set of recommendations on how the variety of organizational and individual expec-tations may be addressed.

The second paper takes us into the world of vir-tual collaboration as David Randall explores the potential of Media Synchronicity Theory to predict behaviour and to enable efficient task performance in virtual teams. Based on multiple data collection methods and data sources, he sets out to test the theory against a set of hypotheses in an empirical setting. The comparison of the theory with the data leads to critical results. Media Synchronicity Theory is only helpful to a certain extent, since it loses its predictive validity with teams experienced in virtual collaboration.

Kyle Hoback studies innovative business models for an industry that struggles with the rise of inter-net-mediated and mass-amateur publication – the newspaper. Following a resource-based view of the firm as well as institutional concepts, his in-depth analysis unfolds the predicaments newspapers find themselves in. Followed by a focus on mobile tech-nology and the commercialization of online content, the paper outlines opportunities for newspapers to implement new business models more aligned to the new circumstances while keeping their core compe-tencies.

The role of information technology in the recent fi-nancial crisis is at the centre of the paper by Mariya Dimova. A very timely topic, she discusses the in-adequacy of control mechanisms for the financial sector based on the notions of markets and hierar-chies. She proposes a view based on the notion of networks as found in large-scale inter-organization-al information systems. Adopting a system theoreti-cal approach, she stresses the emergent attributes and systemic factors we need to consider in order to learn from past mistakes.

Nadeesha S. Nanayakkara explores the institutional arrangements in IT offshore outsourcing. Applying a comparative case study on offshore IT vendors in Sri Lanka, the paper analyses the institutionalization of practices into local settings stressing the importance of organizational visions, organizational learning and intra-firm relationships.

The papers of the special issue cover a wide range of topics reflecting the variety within the field of Infor-mation Systems; a variety that needs to be nourished in order to be able to track the increasing diffusion of information and communication technologies across the entire social spectrum – be it everyday, organiza-tional or institutional life. In this spirit, we hope for an enjoyable and interesting reading.

Attila MartonEditor-In-Chief

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KEYWORDS

ICT-Related Organizational Change

ERP Implementation

Cultural-Historical Activity Theory

Organizing Visions

ABSTRACT

ICT-related change is usually studied from the point when a technological artifact has arrived in an organization. Applying an activity-theoretical lens, this paper explores the contradictions within a medium-sized organization’s central activity system, the manifestations of which motivated the decision to engage in a substantial change and shaped the object of the initiative. It illuminates the preparatory Business Process Re-engineering phase of an ERP implementation, examining the explicit and implicit mediating roles played by the organizing vision of the ICT before the actual artifact has been chosen and installed. Finally, the unfolding of object-oriented processes of socially mediated learning that took place during Business Process Re-engineering is analyzed, exposing how these processes resulted in the divergence of expec-tations and preparations for the arrival of technology amongst members of different organizational groups.

Corresponding Author Email Address: [email protected] (A. Koloskov)

Preparing for Technology-Related Organizational Change An Activity-Theoretical Perspective

Alexandre KoloskovMSc Analysis, Design and Management of Information SystemsInformation Systems and Innovation GroupDepartment of ManagementLondon School of Economics and Political Science

IntroductionThe relationship between Information and Com-munications Technology (ICT) and organizational change is a topic that has been drawing consider-able interest from both academics and practitioners for several decades. The changes that continue to occur as ICTs permeate organizations and become intensely involved in interorganizational relations, decision-making processes, operational procedures, horizontal and vertical social interactions as well as employees’ work practices are multi-faceted, com-plex and unpredictable to say the least (Ciborra 2004). The ongoing interest in phenomena that emerge as these technologies become ever more deeply embed-ded in social systems has been pursued by scholars and practitioners with the help of a plethora of theo-retical lenses, models and methods that have been advanced to illuminate, explain and in some cases attempt to predict, the consequences of the increas-ing ‘digitalization’ of the organizational workplace.

The study presented in this paper focuses on the early stages of the unfolding experiences of an inter-national organization as it prepares to harness a spe-cific type of ICT, an Enterprise Resource Planning (ERP) system, to enable the effective reinvention of its operations and culture – its very essence. This paper ‘imports’ a theoretical framework – Cultural-Historical Activity Theory, henceforth AT – that is

not widely used in IS but affords coherence with es-tablished approaches within this multidisciplinary landscape. AT is used to explore the ways in which ERP software is implicated in the collective learn-ing processes that occur as organizational members collaboratively engage in the dialectic development and articulation of a future form for their organiza-tion. The first section presents a concise discussion of relevant literature on technology-related orga-nizational change and elaborates the scope of the study. AT is then introduced as a lens for studying artifact-mediated collaborative learning and is sub-sequently applied to analyze and interpret the find-ings. The final section summarizes the central argu-ment, commenting on the implications for practice and the contribution of the findings in relation to broader discussions about ICT and organizational change.

Studying Technology-Related Organiza-tional Change

Scholars from several fields, most notably organiza-tion studies, administrative science, strategic man-agement and information systems have championed various techniques for understanding organizational change so as to manage or ‘control’ it. The central im-portance of rational analysis and managerial agency are hallmarks of such instrumental approaches. Ad-vocates of managing change by means of planned interventions initiated and orchestrated by manag-ers in response to perceived problems, opportuni-

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ties or threats to the organization build on the basic linear assumption that a desired future state can be articulated and a series of controlled logical steps, within the scope of a thoroughly planned initiative, will successfully lead the organization to this goal. These approaches also offer numerous rational, logi-cal, ‘hard and fast’ rules and practical methods that promise to deliver sustainable benefits from invest-ments in ICTs (e.g. Hammer and Champy 1993; Kot-ter and Schlesinger 2008; Peppard and Ward 2005).

Peppard, Ward and Daniel’s (2007) ‘Benefits Depen-dency Network’ exemplifies a methodology that builds on the ideas of business process re-engineer-ing (BPR) and involves a systematic top-down ap-proach where managers start with a strategic vision of their organization from which they derive desired future benefits which, in turn, serve as a basis for the design of ideal future business processes which can then be ‘delivered’ through the implementation of integrated large-scale ICTs like ERP systems. Ulti-mately, the goal of the intervention is to replace the current working practices with the presumably su-perior reengineered process model.

The Limits of a Single Paradigm

Rationalizing and standardizing entire existing ac-tivity systems so that they correspond to ‘best prac-tice’ abstractions and can be represented as business processes in the digital language of the ERP soft-ware, incorporates “a conception of organizations as procedural machines and imposes a behavioural mechanics throughout the organization” (Kallinikos 2004:157). No matter how many experts are involved, and how careful they are in designing the ‘new’ pro-cesses, the inherent reductionist logic of such exer-cises necessarily ignores the contingent nature of everyday work and creates an idealistic and linear representation of organizational activities. Thus, “invisible work” (Engeström 2008:23), the tacit and informal aspects of successfully accomplishing real tasks is omitted from the organizational blueprint. If the operation of the system along these stream-lined paths does not allow sufficient flexibility for situated adjustments, improvisation and brico-lage – inevitable and uncontrollable features of the change-related learning processes that occur as em-ployees embed the former into their everyday work practices – they are likely to look for (and find) ways to circumvent the software (Ciborra 2004). This, in turn endangers the realization of the benefits it was supposed to deliver. More importantly, potentially valuable local attempts to adapt to changes in the real-world operating environment and develop in-novative ways of working “from below” (Engeström 2008:26) are either stifled outright by the restrictions imposed by the software, or perceived by managers as signs of ‘resistance to change’ which need to be

neutralized or contained rather than embraced and cultivated. Finally, the culture and history of the or-ganization, which give meaning to the institutional structures and established routines that constitute its activity systems, are portrayed as ‘things’ that must be changed and forgotten, respectively.

Does this suggest that change can not be managed methodically at all? Intrepretivist researchers who question the assumptions of objectivity that underlie most managerial accounts argue that improving and broadening understanding of the heterogeneous phenomena, composed of natural-scientific (ICTs) and social-scientific (humans, organizations) ele-ments, in question is best achieved by exploring the new insights that alternative paradigms can provide (Ciborra 2003; 2004; Orlikowski and Baroudi 1991; Robey and Boudreau 1999). Change and innovation within social systems are complex, multi-faceted processes that can not be adequately understood from one single theoretical angle. Social construc-tivist theories deriving from science and technology studies and the sociology of scientific knowledge have significantly influenced interpretive studies of organizational change (Orlikowski 2000).

Constructivist Alternatives

Sociological and anthropological theories of situ-ated action provide the basis for such a prominent constructivist stream that enquires into the contin-gent local practices of individual members of orga-nizations and the way that they really use (or don’t use) ICTs in their everyday work. This perspective leaves room for both intended and unintended consequences of technology-related organizational change to emerge from the ongoing recursive in-terplay between the interpretive, technological and institutional layers of a given change initiative (Or-likowski 2000).

Another constructivist approach, Actor Network Theory (ANT), is grounded in the belief that “tech-nology is society made durable” (Latour 1991). It helps researchers to uncover the dynamic and un-predictable socio-political processes of negotiation, translation, representation and dissidence that de-fine and shape both the process and the real out-comes of technology-related organizational change in practice. Though it is not explicitly associated with ANT, Swanson and Ramiller’s (1997) notion of orga-nizing visions applies such constructivist logic to the peculiar processes by which organizations discover and make sense of IS innovations in the context of a vibrant commercial market that churns out new ICT ‘solutions’ at a dazzling pace. The authors argue that a broadly-based, culturally- and historically-evolving discourse amongst an interorganizational community of journalists, academics, practitioners

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and other interested parties is involved in the cre-ation of a collective image of a particular innovation – an organizing vision. To a significant degree, this shapes cross-contextual interpretation and legitima-tion of the artifact, delineating its ‘proper uses’ and affordances, and influences internal decisions about which ICTs an organization ‘needs’ (ibid.).

Why not Constructivism?

By focusing on the ‘moulding power’ of local con-texts or vested interests constructivist accounts ob-scure important facets of the relationship between ICT and organizational change. They tend to overes-timate the general malleability of ICTs and underes-timate their historical character. Furthermore, such accounts all but ignore the collective, object-oriented and artifact-mediated dimensions of social learning processes. Finally, the underlying conceptual frame-works do not readily lend themselves to the analysis of the early stages of change initiatives, before the technological artifact has been introduced into an organization.

This paper draws on Cultural-Historical Activity Theory to address these gaps. It is argued here that the initial phase of deliberate managerial change ini-tiatives, when an organization is engaged in plotting a vision of its future and preparing for the ‘arrival’ of ICT, is an important scene of processes of col-laborative knowledge creation. The consequences of these processes frame the further progress of the implementation of the ICT and the broader trajecto-ry of organizational change, and thus warrant closer analysis.

Activity Systems, Object-Orientation and Mediated Learning

Cultural Historical Activity Theory (henceforth AT) was developed for psychological studies of con-scious human activity in the second half of the 20th century (Leont’ev 1978; Vygotsky 1978) but has since been elaborated, expanded and applied to the study of collaboration and learning in organizational con-texts (Engeström 2008). It is based on the concep-tualization of an individual’s interaction with the world in terms of a hierarchy of deliberate activities that are driven by particular motives and directed at corresponding external objects, conscious goal-oriented actions that constitute these activities and subconscious contingent operations which, in turn, constitute actions.

Learning and skill development can lead to the col-lapse of some actions into operations, freeing up cognitive capacity for other actions. Under certain conditions (e.g. intense stress) operations may be propelled back into an individual’s consciousness.

Individuals are always simultaneously engaged in a number of activities (Wiredu 2005).

From an AT perspective, organized collective hu-man activity is seen as “a systemic formation that has a complex mediational structure” (Engeström 2008:26) and is always directed at an object – an ex-ternal thing or motive that, to varying degrees, cor-responds to the fulfillment of the needs of the par-ticular activity’s participants or subjects (see Figure 1). In a subject’s consciousness, the object has a dual nature – it simultaneously corresponds to distinct individual as well as collective needs. The pursuit of the object leads to its transformation into a particu-lar outcome. This process is never direct but rather always mediated by a set of tools – physical artifacts with objective properties that limit and constrain activities in particular ways and psychological ones such as mental representations, signs and symbols. These two types of tools are intricately linked, since the conscious use of a physical tool necessitates a mental representation of it, which is created through the process of interiorization (see below).

Below the surface of this triangular ‘subject – tool – object’ relationship, activities are also mediated by three types of social factors. Subjects act or operate according to a set of formal and informal rules and some sort of established division of labour. Finally, subjects always act within some sort of community, which provides the immediate social context of the activity system. All mediating components – tools, rules, community and division of labour – embody, to various degrees, historically-evolved idealiza-tions of collectively, socially defined meanings.

Figure 1: The complex mediational structure of a human activity system (after Engeström 2008:26)

All of the components of an activity system are inter-related, and in dynamic tension within themselves and with each other as the activity unfolds. Contra-dictions are inherent within each component (level 1), amongst the interrelated components (level 2), as well as between external environmental factors and neighbouring activity systems (levels 3 and 4) in particular. These contradictions are of significant in-terest in that they are both critical for understanding

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the causes of disturbances within the central activity system and constitute potential sources of innova-tion and change.

Object-related contradictions arise from the ongoing dialectic between personal and collective motives and the associated differences in mental representa-tions of objects in a subject’s consciousness. For oth-er components of an activity system contradictions emerge from differences between manifestations of the components in the physical world and subjec-tive mental representations, referred to as personal senses. Individuals perform actions by externalizing their mental representations of an activity system to transform an object and subsequently interior-ize their subjective perceptions and interpretations of the changed material nature of the object and the other components of the activity system that medi-ated their interaction with the physical world. The resulting “subjective properties are shaped by the subject’s idiosyncratic interpretation of the indepen-dent properties, connections, and relations of the ob-jective world” (Wiredu 2005:95).

Individuals gain experience, refining these personal senses, by repeating a particular action under dif-ferent conditions. Moreover, personal senses neces-sarily differ from subject to subject, and collective activity is thus never perfectly aligned. In terms of its cyclical and reflexive nature this theorization of the individual learning process bears similarities to descriptions of learning loops in managerial ac-counts (Andreu and Ciborra 1998) or enactment of technological structures in constructivist studies (Orlikowski 2000). However, AT is distinguished by its emphasis of the inherently mediated and social nature of learning occuring within a collective activ-ity system.

If an activity system is riddled with contradictions, how can it function coherently and effectively, de-livering the outcome desired by its subjects? A cer-tain degree of disturbances can be contained by the relatively stable mediating components of the sys-tem, guiding individual actions and maintaining a general state of stability that is required to accom-modate a relatively smooth and coordinated flow of collective actions. However, level 2 contradictions that manifest themselves as persistent bottlenecks, inefficiencies and frequent breakdowns can substan-tially inhibit the achievement of collectively desired outcomes. Such contradictions invigorate the inno-vative potential of an activity system by motivating attempts to search for solutions and collectively de-velop new work procedures or introduce new tools. In contemporary organizations, such solutions are often mediated by ICTs and their special character needs to be considered in detail.

The Special Character of ICT Artifacts

ICTs combine a tangible material form, exhibiting objective design properties that constrain users’ actions, with more intangible abstract attributes of complexity, invisibility, and conformity (Brooks 1987).

The complexity and invisibility of ICTs, can be elab-orated by alluding to the objectifying strategies of functional simplification and closure as critical con-stitutive elements of ICTs (Kallinikos 2004). The for-mer refers to the reductionist nature of the way in which specific causal relationships are selected, rep-resented and instrumentalized in order to achieve functional utility. These relationships are strong abstractions, or simplifications, of the contingent and heterogeneous nature of reality. These abstrac-tions embody a cross-contextual, historic tangle of assumptions and ideals (ibid.). One of the main rea-sons for the invisibility of software is the persistent lack of adequate visualization tools, which can rep-resent its underlying complex conceptual structures in ways that are comprehensible to a wide audience (Brooks 1987). As the simplified relationships (and thus the functionality of the software) only hold for a standardized set of inputs, closure substantially restricts the environment within which humans en-counter ICT. The majority of the functional structure thus remains invisible, or “underground”, and is not subject to direct local interference (Kallinikos 2006). This implies that, no matter how ‘changeable’ a par-ticular ICT may seem on the surface that is percep-tible to its users, its internal logic is very much pro-tected from and thus recalcitrant to the specificities of real organizational contexts.

Finally, conformity is a prerequisite for and a conse-quence of embedding ICTs into real organizational contexts with particular imbrications of historic, technological and social constraints that the arti-facts must adhere to. Technologies are never put into practice in a vacuum, but rather are adopted within the pre-existing idiosyncratic organizational environment into which they are implanted. Most contemporary organizations will already have a par-ticular mix or portfolio of different kinds of ICTs in place which their members will have integrated, to a greater or lesser degree, into their work practices (Mathiassen and Sørensen 2008; Orlikowski and Iacono 2001).

From an activity-theoretical view, artifacts are sym-bols of “shared cultural-historical understandings” (Wiredu 2005:102). ICTs can thus be conceptualized as embodiments of a complex tangle of scientific knowledge, prescriptive assumptions about social relations and principles of organizing. However, this collection of objectified intentions and layered

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cultural-historical ideals remains largely hidden from the user’s view. Instead, the socially construct-ed understandings that provide basic meaning to an ICT artifact in a particular organizational context are conditioned by organizing visions – themselves collectively shaped bundles of cultural-historical knowledge (Swanson and Ramiller 1997). Individu-als subsequently create personal senses of the affor-dances and ‘proper uses’ of ICTs as they act within the mediating contexts of the activity systems that constitute the organizations and groups that they are members of.

With the help of this conceptual lens, the following sections explore a detailed account of the early stag-es of an ongoing technology-related organizational change initiative.

Setting the Scene

Technical Cooperation International, henceforth TCI, is an independent organization within the United Nations system , which, for over 40 years, has been providing project-based technical coopera-tion, knowledge transfer and advisory services to support the economic development efforts of devel-oping countries around the world. The organization employs technical experts who design and deliver projects with the long-term goals of reducing pov-erty, improving the ability of local firms to engage in global trade and developing industrial infrastruc-ture in an environmentally sustainable way. TCI has over 650 employees working at its European headquarters and over 2,800 experts and consul-tants on temporary assignments to its various proj-ects in developing countries. Headquarter staff are organized into three principal functional divisions which are responsible for project management, re-search and field operations and project support and administration, respectively. The organization also operates field offices in over 40 different countries. TCI is given its mandate by a General Conference comprised of representatives of the governments of its 173 member states, which pay annual contribu-tions to finance its ongoing operations, determine its policies, approve its thematic programmes and budget and elect its Director-General. Individual projects are funded through further, project-specific donations from member state governments or other intergovernmental bodies.

The organization has recently embarked on a 4-year Organizational Renewal initiative (henceforth, OR) in order to implement the fundamental changes that were identified as necessary to realize its new strategic vision. An ambitious mission statement ar-ticulated this vision, expressing the objectives of im-proved quality, greater impact and increased annual throughput (in US Dollars spent) of projects and the

ability to provide better information about project outcomes to stakeholders to reinforce TCI’s reputa-tion and relevance. OR was launched outright with the creation of a dedicated ‘change office’ comprised of two senior managers from within the organiza-tion as well as an experienced organizational change consultant who joined TCI full-time after having earlier conducted the feasibility study for this ini-tiative. It also involved the formation of two part-time ‘task forces’ to plan and carry out initiatives to improve organizational efficiency and effectiveness and introduce changes to management practices and working culture, respectively.

In order to establish momentum for the initiative the team implemented a series of ‘quick wins’ – incre-mental changes to streamline administrative proce-dures and reduce the reliance on paper to a mini-mum. Subsequently an extensive Business Process Re-engineering (BPR) exercise was carried out fol-lowing the Benefits Dependency Network method-ology (Peppard et al. 2007). Over 70 employees from across the organization thus participated in the re-invention of TCI’s project management cycle from beginning to end. Subsequently, an ERP software package would be implemented and customized based on this re-engineered process model.

This study focuses on the events and developments that transpired over the course of two months, start-ing 3 weeks before the beginning of the BPR exercise and ending one week after the last workshop. The research was conducted from an interpretive stance, in an attempt to systematically discover, explore and understand the variety of interpretations of OR within TCI (Klein and Myers 1999; Schultze 2000). Over a period of 4 weeks the author participated in all 6 BPR workshops, capturing the discussions that took place among participants (10 to 15 people per session) who were selected from different depart-ments in the organization and the process designs that they agreed on. Each workshop lasted a full working day, and involved a different group of par-ticipants. The researcher subsequently assisted the BPR team (consisting of the original OR team and 4 external consultants) in their analysis of the col-lected data and the production of a comprehensive process re-design blueprint.

The data was supplemented by 10 semi-structured interviews with employees and managers from different functional divisions, numerous informal conversations with other organizational members, attendance of OR-related presentations and docu-ments related to the organization, and OR in partic-ular. Quotations from interviewees, the OR change team as well as BPR workshop participants are used to illustrate the analysis.

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TCI as a Human Activity System – ‘Arti-sans versus Administrators’

It is important to note that the organization com-mitted to the significant costs and risks associated with the initiative in a proactive and anticipatory way, rather than being forced into it by a crisis. In the words of a senior manager who has been at TCI for over 25 years: “there is an urgency about organi-zational renewal, but its not based on fear, its based on let’s improve.” The recognition of developmental potential indicated the existence of contradictions within the organization.

From an AT perspective, TCI’s Project Managers (PMs) can be represented as subjects of a central activity system (see Figure 2) directed at the trans-formation of the object of transferring technical knowledge, in the form of projects, into outcomes of economic development impact in recipient coun-tries. The imperfections identified above can be con-ceptualized as disruptions to the smooth realization of the ‘scripted’ or planned delivery of projects that are symptomatic of systemic contradictions.

ning to delivery and closure. Moreover, incentives strongly favoured individual performance, “protec-tion of turf,” and discouraged collaboration with colleagues. The lack of a clear and robust definition of roles and responsibilities across the organization meant that PMs were free to develop individual ap-proaches to accomplishing their work. Many became “jacks of all trades” engaged in “artisanal” crafting of projects, whose attention to the object of deliver-ing high quality projects was diffused amongst a range of administrative, financial, and logistical con-cerns that punctuated the everyday delivery routine.

The degree of autonomy afforded to PMs necessitat-ed the creation of a vast array of controls and rules so that their activities would conform with the rela-tively stringent financial rules and regulations im-posed upon the organization by member states and the UN system. The consequence was a historically accumulated set of intricate and often redundant bu-reaucratic checks and balances. This made work at TCI ‘paper intensive,’ opaque and slow. An employ-ee described the culture of the organization as be-ing “overburdened by monitoring and controlling.” Instead of establishing ways of working effectively within these constraints, PMs engaged in actions to avoid or circumvent them, distracting their efforts from the original object.

The contradictions between these mediating compo-nents and the object are linked to a deeper issue, in-grained in the history of the organization. TCI’s cul-ture was shaped by a strongly held belief, built up over many years, that the organization is “in many ways unique” and operates in “a situation that is very complex and heterogeneous” implying, in turn, that any form of standardization is unthinkable. This state of affairs was manifested in the immedi-ate hierarchical organization, where problems with collaboration and trust across TCI’s three divisions abounded. A senior manager thus described PMs as “100 Rembrandts, each working away at their own masterpieces.”

As PMs reveled in their artisanal role their subjec-tive understanding of the object gradually drifted from the collective ideal of service delivery to the individual ideal of protecting their own autonomy. This fundamental contradiction with the collective object of the organization led to a fragmentation of the community – an ongoing struggle for autonomy between PMs and the rest of the organization, often seen as administrators rather than collaborators. Se-nior managers were growing increasingly concerned at the consequences of this deep contradiction: dete-riorating project quality and the widening of the ‘op-portunity gap’ – TCI’s inability to convert available donor funds into projects with positive and tangible outcomes. Their response was the launch of OR – a

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Figure 2: TCI Project Management as a human activity system with level 2 contradictions

Three contradictions between different components of the system (level 2) can be identified. The first one reflects the tensions between the tools that medi-ate the activity, particularly ICTs, and the object of service delivery. Obtaining complete, accurate and timely information about projects entailed a signifi-cant amount of manual work in TCI’s fragmented landscape of legacy ICT systems. Instead of provid-ing an infrastructure that supports project delivery by enabling fast and convenient use and produc-tion of information, these tools actually imposed the additional burden of surveying disparate sets of data and manually compiling them into a coher-ent whole, thus distracting attention, effort and time from the original object.

The division of labour was also in contradiction with the object. In practice PMs were responsible for all aspects of a project from conception and plan-

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culturally more advanced activity system mediated by the tools of Business Process Re-engineering and ERP software to transform the object of establishing a minimum standard of quality in TCI’s central ac-tivity into the realization of the objectives in the mis-sion statement.

Object-Oriented Interiorization of the Organizing Vision of ERP

OR was explicitly shaped by its significant techno-logical component. The implementation of an ERP system came to be seen as an indispensable measure if the organization was to achieve a fundamental change in the way it ‘does business.’ In TCI’s im-mediate environment, the organizing vision of ERP had reached a stage of institutionalization, where it seemed like all of its peers within the UN system were either in the process of implementing such software or were already using a version of it. Sys-tematic change management would allow TCI to benefit from the software’s purported affordances of precise control, seamless coordination, provision of accurate and relevant information in real time, procedural transparency and the ensuing organiza-tional efficiency and effectiveness. Directed by their object, the subjects of OR interiorized the prevalent organizing vision of this ICT. According to a senior manager who championed OR, the new system was expected to have both explicit and implicit control-ling effects, as an obligatory point of passage to “force people to change the way they work” and by rendering individual actions vulnerable to inspec-tion in real time, respectively. In the consciousness of OR’s subjects, the ERP system was an instrument of control, the equivalent of a Latourian machine (Latour 1987), a stratagem to bundle the contradic-tory actions of employees, making them predictable, transparent and directing them along a “controlled corridor of activity,” towards the collective object.

BPR Workshops as Collaborative Object Reconstruction

The re-engineering of whole processes of work into a series of standardized operational sequences was deemed a necessary and desirable measure that would allow the object of OR – an improvement of the average quality of projects – to be transferred to the subjects of TCI’s central activity system. The OR team had prepared a detailed model of the desired future project management process to frame the BPR workshops. Although no direct reference was made to technology, the model implicitly embodied their personal sense of the ERP system as an instrument of control. Each workshop was opened by a brief moti-vational speech by a senior manager that reiterated the paramount aim of BPR as facilitating a sustained transition to a more standardized “industrial” form

of project management with a “minimum quality of project documentation and a corresponding mini-mum quality of outcomes.” This was an attempt to construct and ‘hand down’ the object, directing the activities of workshop participants towards it. The BPR workshops were organized along the prescrip-tions of starting from this object and then system-atically “fleshing out” concrete models of how to realize it. Participants were urged not to consider concrete ICTs at all, but rather to collectively define a ‘technology-independent’ ideal set of activities to constitute the redesigned process. The resulting clear and unambiguous model would later provide the specification against which the ERP software would be selected and implemented.

However, workshop participants, who were them-selves subject of TCI’s central activity system, did not simply accept the object that was handed down but rather went about creatively reconstructing it themselves. They often questioned the logic and cor-rectness of the process model that they were tasked with filling in and found it difficult to fit their ex-periences and knowledge into its linear constraints. Discussions tended to deviate from the prescrip-tions of the methodology as participants inexorably reverted to analyses of the current situation, bring-ing out and exploring various manifestations of the level 2 contradictions presented above. They framed and anchored their debate using various rhetorical artifacts: vignettes of personal experience, organi-zational acronyms, existing forms, documents and rules. In these debates the different perspectives of the organization that each participant held “met, collided and merged” (Engeström 2008:129) to form new collective knowledge about how to improve project management at TCI.

The functionalities and affordances of ICTs were ex-plicitly discussed during phases of modeling future processes and analyzing scenarios to evaluate their feasibility. These discussions revealed that the ma-jority of participants only had a nebulous and incho-ate understanding of ERP systems: “[it] is not much more than a brick to people [like us] who have not seen it in practice or worked with it.” They relied on anecdotal fragments, supplied by the consultants and OR members, of the functionalities and affor-dances to construct personal senses of an idealized ERP system. They supplemented this understanding with their own experiences with and knowledge of contemporary ICTs, conceptualizing the system as another, more sophisticated element of a portfolio of information services, an information tool that would enable them to fulfil the tasks that their everyday work put before them in a more effective fashion (Mathiassen and Sørensen 2008). Statements like “if we use IT properly I should never ever have to retype my name again” exemplify the character of

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these personal senses and suggest that, for the pur-poses of most participants, the entire ICT landscape should perform like a heterogeneous whole, an en-abling platform that provides relevant information when and where it is needed.

The Unresolved Divergence of Personal Senses

Unlike other central issues related to the level 2 contradictions identified above the dichotomy (see

Figure 3) between the personal senses of ERP held by subjects of OR and those constructed in these workshops by subjects of the central activity system were not explicitly discussed, clarified or reconciled at any point. Instead, the divergent understandings of what the new system would afford remained un-resolved and buried under the surface of the re-en-gineered process model that should form the basis for the selection and implementation of a concrete software product. It is likely that this subtle contra-diction would be the source of disturbances and in-

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Figure 3: Contradictory personal senses as a product of object-oriented interiorization

novations throughout the impending implementa-tion process and beyond.

Conclusion

Most studies of the relationship between ICT and organizational change focus on what occurs when a technology is implemented and the period there-after. The arguments presented in this paper em-phasize the explicit and implicit mediating roles of a particular ICT before it has arrived in the organi-zation. It is rare that the perspectives of managers and employees are truly aligned, and, given their distinct objects, it is in fact questionable whether such an alignment is possible or even desirable (Engeström 2008). Thus, it should not be surprising that the personal senses of an ‘invisible’ ICT that is as complex as an ERP differed qualitatively be-

tween the subjects of TCI’s central activity system and those of OR, whose actions were directed by a different object and informed by a powerful orga-nizing vision. These personal senses of technolo-gies shaped the organization’s preparations for the arrival of technology and thus will have an impact on the implementation stages and what lies beyond. BPR methodologies should, therefore, inform and train participants on the specific functionalities and affordances of the ICT, so as to ensure a broadly shared basic understanding and pre-empt conflicts in the implementation phase. Moreover, managers of change initiatives may benefit from heading into BPR discussions with a flexible perspective and a blank notebook. Among the difficult debates and idiosyncratic propositions, these dialectic collabora-tive processes produce a wealth of innovative ideas for developing the central activity system.

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Finally, investigating the influence of conflicting personal senses, and the contradictions that they may spill out into, on the full trajectory of an orga-nizational renewal initiative and their development along the way provides an enticing avenue for fur-ther research. It is the author’s sincere belief that a wider acceptance of AT in Information Systems would provide a substantial addition to the “di-versity of understandings” available to IS scholars (Avgerou 2000). There have already been successful attempts to apply AT in IS studies of innovation and learning (Kietzmann 2009; Wiredu 2005) and this paper provides initial evidence that the lens is ap-plicable for the study of ICT-related organizational change.

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Orlikowski, W. J. and Iacono, C. S. (2001) Research Commen-tary: Desperately Seeking the “IT” in IT Research - A Call to Theorizing the IT Artifact. Information Systems Research 12(2). pp. 121-134.

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KEYWORDS

Media Synchronicity Theory

Virtual Teams

Online Communities

DARPA Network Challenge

Information Systems

ABSTRACT

“The problem with communication is the illusion that it has occurred” (George Bernard Shaw). As organisations become more globalised rising time and cost constraints force them to increasingly make use of virtual teams. As a result of the continuous expansion of such teams in the workplace research and theories into their performance become ever more important. This study investigates the validity of one such theory, Media Synchronicity Theory, in predicting the performance of virtual teams in completing complex tasks, specifically teams whose members belong to an online community. There is currently little empirical evidence to support Media Synchronicity Theory, especially when related to virtual teams. This study provides such evidence and shows support for the theory in predicting behaviour that leads to effi-cient task performance amongst a virtual team. The results also find contra-dictory evidence towards Media Synchronicity Theory, suggesting that some aspects of the theory do not hold for teams more experienced with computer mediated communication – such as teams from online communities. The results suggest a need for more empirical evidence of Media Synchronicity Theory to help corroborate the results. Future research is also suggested into the impact online community membership can have on achieving better task performance.

Corresponding Author Email Address: [email protected] (D. Randall)

Ten Red Balloons: Virtual Teams and Online CommunitiesA Test of Media Synchronicity Theory

David RandallMSc Analysis, Design and Management of Information SystemsInformation Systems and Innovation GroupDepartment of ManagementLondon School of Economics and Political Science

IntroductionAs we move further into the 21st century, organisa-tions are becoming increasingly more globalised, with expansions and acquisitions spreading their workforces all over the world. With a need to get tasks completed ever faster, the increasing pressures of the market and global recession driving down spending, there is a rising need for effective virtual team work (Grinter et al. 1999). Research into sup-porting such virtual teams - and computer mediated communication (CMC) - is therefore becoming in-creasingly important, especially in relation to teams performing complex tasks.

A key element in the successful performance of A key element in the successful performance of virtual teams is the effective utilisation of communication media. Purely virtual teams survive without the aid of face to face interaction and are reliant completely on technology such as instant messaging (IM), video chat and email. Much of this technology is asyn-chronous in nature (defined as technology which introduces delays between the sending of a com-munication and its being received (Markus 1994),

and as such is regarded in some of the literature as being low in ‘richness’, and therefore deficient to ‘richer’ media, in accordance with the popular Media Richness Theory (MRT) (Daft and Lengel 1983; 1986).

MRT has been widely used in a variety of studies over the past 20 years, many of which have discov-ered contradictory evidence and as a result MRT has been the recipient of much criticism (Markus 1994). In an effort to find a better explanation of optimal performance in CMC, Dennis and Valacich (1999; 2008) proposed the Media Synchronicity Theory (MST). MST posits that effective communication re-lies not on the ‘richness’ of the media but rather the suitability of that media to the communication pro-cesses required to complete a given task.

For virtual teams, who have an ever larger variety of communication media at their disposal, MST is especially important. Choosing the correct media, or combination of media, can mean the difference be-tween the success and failure of a project, but MST is lacking in empirical support - especially in the con-text of purely virtual teams. As a result, this study will investigate the validity of Media Synchronicity Theory in explaining the performance of a virtual team engaged in a complex task, specifically a vir-

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tual team comprised of members of an online com-munity.

It is the overall aim of the study to not only gain much needed empirical evidence for MST, but also to provide insights into the behaviour and charac-teristics of members of online communities as they perform complex tasks.

Background

Virtual Teams

A single definition of a virtual team (VT) is difficult to find in the literature, but it shall be defined here as: a group consisting of members who are bought together to complete a task and interact only via CMC. Most often characterised as being geographi-cally, temporally and culturally diverse (Bosch-Sijt-sema 2007). It should be noted that while it is agreed that virtual teams can use face to face interaction on occasion, this should be done sparingly (Curseu et al. 2008; Jarvenpaa and Leidner 1999), and that the definition does not include hybrid teams (those who use both face to face and CMC).

Research is increasingly showing smaller differenc-es between the performance of VTs and co-situated teams. Some older studies, such as those by Walther (1995) and (McGrath and Hollingshead 1993), show that the differences between face to face and virtual teams disappear over time, as they gain more ex-perience with the media and develop strategies for better group performance (Lira et al. 2006). In their recent study Naik and Kim (2010) found evidence that virtual teams performed effectively when there was a more socio-emotional dimension to team in-teraction, especially when this interaction provided knowledge that aided in the completion of a task. This relates to Orr’s (1996) study that showed the importance of so called “water-cooler moments”, where individuals share “war stories” of their ex-periences performing tasks (in this case repairing photocopiers), which not only increases the work-ing knowledge of other team members, but also pro-motes team bonding through increased socio emo-tional interaction. Work by Handy (1995) has also showed the importance of team bonding and shared social understanding in increasing the performance of teams. For virtual teams, who can never meet in person, such social interaction can be difficult. How-ever, help may be at hand in the form of social net-working sites (SNS) and online communities, where individuals can interact outside of a work setting to increase team bonding and performance, whilst still communicating virtually.

Very little research has been performed into the performance of virtual teams composed purely of

members of online communities. This study will en-deavour to fill some of this gap in the research by investigating of the validity of Media Synchronicity Theory among teams from virtual communities.

Origins & Development of MST

Media Synchronicity Theory has it’s origins in the Media Richness Theory (MRT) first proposed by Daft and Lengel (1983; 1986). MRT states that media exist in different levels of ‘richness’ (see Figure 1). Richness is defined as the “ability of information to change understanding within a time interval” (Daft and Lengel 1986:560) and the theory posits that me-dia choice should be determined by matching the technology to the task. Ultimately the ideal situation would match a tasks required needs to a medium’s richness, resulting in optimal task performance.

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MRT has been the subject of many studies since its creation (Naik and Kim 2010) and as a result has been adapted several times (McGrath and Hollings-head, 1993), but despite this research MRT has con-tinued to produce inconsistent results. Studies such as those by Markus (1994), Yates and Orlikowski (1992), DeLuca (2003), Kock (2001) and Lee (1994) have highlighted many flaws in MRT. It would seem that the attitudes towards media choice are not in fact based on actual richness, but rather on the per-ceived richness of the media. Dennis and Valacich (1999) go further than stating contradictions and propose that a majority of the research hasn’t found support for MRT at all. They posit this is because performance is not contingent on matching media richness to task and propose MRT should be aban-doned and replaced by more appropriate theory.

Media Synchronicity Theory

In response to the many contradictory studies into MRT, Dennis and Valacich (1999) put forward the Media Synchronicity Theory (MST) as a way to ex-plain successful task performance by teams and the

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D. Randall / iSCHANNEL 6(2): 13-21

Figure 1: Levels of media richness. Source: Wikipedia

contractions found in studies of MRT. A detailed di-agram outlining the theory can be found in Dennis, Fuller and Valacich (2008:582).

Synchronicity

MST’s focus is on the capability of media to support synchronicity. It states that optimal performance oc-curs when the synchronicity of a medium matches the synchronicity that a communication process re-quires. Media Synchronicity is defined as “the ex-tent to which the capabilities of a communication medium enable individuals to achieve synchronic-ity”. Synchronicity in MST is therefore defined as “a state in which individuals are working together at the same time with a common focus” (Dennis et al. 2008:581).

Task

The central theory of MST is that effective commu-nication does not arise from the matching of the ca-pabilities of a media to the overall task, but rather by matching it to the processes needed to complete a task. Thus MST separates task into two commu-nication processes, conveyance and convergence (Dennis and Valacich 1999), it is posited that by ex-amining the processes on these levels we will get a clearer understanding of the effect of media on task performance.

Conveyance: “The transmission of a diversity of new information as much new, relevant information as needed to enable the receiver to create and re-vise a mental model of the situation” (Dennis et al. 2008:580) Individuals engaged in conveyance will undertake significant information processing activi-ties and therefore will require time to adequately process the information and make sense of it. (Den-nis et al. 2008)

Convergence: Involves the gaining of a shared un-derstanding about the information that has been processed by an individual - not the raw data. The aim is to develop a shared meaning by discussing participants’ interpretations of the information. This requires not only the formation of a common under-standing, but also a situation where it is mutually agreed that this understanding has been reached (Dennis et al. 2008).

A majority of tasks require both conveyance and convergence processes, whatever levels of uncer-tainty or equivocality those tasks might possess. Without sufficient conveyance it is easy for individu-als to reach conclusions that are incorrect, similarly without adequate convergence individuals cannot move forward with their task because they will not have formed a shared understanding.

Synchronicity and Communication Processes

A key concept of MST is linking communication pro-cesses with the correct levels of media synchronicity. Convergence and conveyance communication pro-cesses will each have different needs for information processing and transmission, due to the differences between them, and thus there will also be different needs for synchronicity (Dennis et al. 2008).

High synchronicity encourages greater levels of interaction and an increase in shared focus among individuals, resulting in a shared pattern of coordi-nated behaviour (Dennis, Fuller and Valacich 2008). High synchronicity is also associated with faster message transmissions, quickly modifiable messag-es and immediacy of feedback (Dennis et al. 2008).

Lower synchronicity allows individuals an increased time between message transmissions to process the content and develop meaning; it also allows individ-uals time to consider other issues like the context of the situation (Dennis et al. 2008).

Conveyance processes will benefit from lower media synchronicity. This is because the processes involved in the transmission and interpretation of data do not require multiple individuals to work together at the same time. Low synchronicity also benefits the re-ceipt of complex messages, as they will require more time to assess and interpret than simple messages.

For convergence processes higher levels of syn-chronicity will lead to improved performance. High synchronicity will support the negotiation and conciliation required for sense making strategies, leading to the more effective formation of shared understanding. As convergence will require less deliberation on new information, the encoding and decoding of information should be faster, given the shared mental models of involved individuals. For convergence processes the ability to verify the ex-istence of a shared understanding is important and will require media of higher synchronicity, as will the ability to understand other individual’s inter-pretations of information (but not the information itself) (Dennis and Valacich 1999).

Media Capabilities

As an addition to the original MST, Dennis et al. (2008) added the concept of media capabilities. These are described as “potential structures provided by a medium which influence the manner in which individuals can transmit and process information” (emphasis in original) (Dennis et al. 2008:583). MST hypothesises 5 media capabilities that can affect the synchronicity of a medium (Dennis et al. 2008):

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(H1) Transmission Velocity: the speed at which a medium is capable of delivering a message to the in-tended recipient(s).

Increased transmission velocity leads to high syn-chronicity due to the improved shared focus which results from more rapid feedback.

(H2) Parallelism: the capacity of a medium to allow for multiple messages to be transmitted simultane-ously.

Parallelism reduces shared focus and as a result lowers a medium’s ability to support synchronicity.

(H3) Symbol Sets: the number of ways in which a medium can encode the information that is commu-nicated

Using more natural symbol sets, and sets appropri-ate to the message content, will improve synchron-icity.

(H4) Rehearseability: the ability of a medium to al-low an individual to edit or refine a message before it is sent.

Rehearseability will reduce shared focus and there-fore lower synchronicity.

(H5) Reprocessability: the ability of a medium to al-low a message to be re examined or reprocessed.

Reprocessability will lower shared focus and in turn will negatively impact synchronicity.

Overall MST shows that using a single media to complete a task may not be the best choice, and that using a combination of several differing media for different communication processes is most benefi-cial (Dennis et al. 2008).

Research Methodology & Design

Following an interpretive approach (Orlikowski and Baroudi 1991) this research investigates the valid-ity of Media Synchronicity Theory when applied to a case study of a purely virtual team comprised of members of an online community.

Participants

The participants in the study were all members of an online community that originated from the subscribers of the ‘Vlogbrothers’ YouTube channel that began broadcasting in 2006. This community, whose members refer to themselves as ‘Nerdfight-ers’, quickly grew from a just few commenters and video responders into much larger numbers. At the

time of the study, there were around 30,000 mem-bers on the Nerdfighter’s Ning social network and the Vlogbrothers YouTube channel had over 134,000 subscribers.

There were 14 participants who made up the virtual team in this study; all were members of the Nerd-fighters community. All participants were from an assortment of cultural, social and ethnic back-grounds from varying nationalities - although a ma-jority of members were from the United States. The participants had never worked together as a group before and a majority had never met, the rest had mostly fleeting interactions though social networks. Although some members of the team had physically met before the task, the vast majority had not and there is a significant enough cultural and geographi-cal dispersal to see the group as a reasonable exam-ple of a virtual team.

DARPA Network Challenge

The competition in which the team in this study participated was the DARPA Network Challenge (DNC). DARPA described the DNC as “a social net-work mobilization experiment to identify distrib-uted mobilization strategies and demonstrate how quickly a challenging geolocation problem could be solved by crowd sourcing” (DARPA 2010).

The aim of the DNC was to locate ten 8-foot red bal-loons that were placed in various locations around the United States. The balloons were simultaneously launched at 10am EST and stayed afloat for 6 hours. The winner would be the first team to report the geo-coordinates of all ten balloons back to DARPA; they would then win the prize of $40,000. For full details of the DNC please consult the DARPA Project Re-port (DARPA 2010).

Case Study

In this case study the Nerdfighters team attempted to use their vast social network to garner informa-tion about the balloon locations. In the first instance the Vlogbrothers channel posted a video on De-cember 3rd which asked for participants to assist in finding the balloon locations by tweeting, email-ing or calling a Google Voice number and leaving a voicemail. From this video a network of around 2000 active participants (who supplied telephone contact details and email addresses) was formed, all agreeing to help find and verify balloon locations. At the centre of the Nerdfighters effort was the core Nerdfighters virtual team. They acted as a sort of ‘war room’, garnering information from community members and other sources in an attempt to find bal-loon locations using a variety of media.

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Data Collection Methods

Data was collected in this study in two ways. First, transcripts of group conversations were acquired from two of the mediums that were used by the team. Secondly a number of semi structured inter-views were conducted with the virtual team mem-bers to gather further empirical data to support the observations made using the transcripts.

The main purpose of the interviews was to discover specifically what media choices were made by the different groups members, the reasons behind these choices and their opinions on different aspects of CMC. Questions were also asked in relation to group trust and conflict although these have a limited im-pact on this particular study.

Results

Participants were observed using transcripts of their conversations and a series of semi-structured inter-views. There was no face-to-face contact with any participants at any time during the project and re-search was performed though electronic media.

Observations from Transcripts

The transcripts of the Skype chat and Google Wave (use of which is discussed below) are logged by de-fault and are therefore available for review and to add to the information available about the team’s performance.

Media Choice

The team had a number of media at its disposal dur-ing the challenge and decided to communicate using Skype for instant messaging (IM) and Google Wave for storing finalised information such as the location of balloons and known fake locations.

A Google Account ‘DARPAnerd’ was also created. This was linked to Gmail and Google Voice so that people could email and leave voicemail messages that the team would regularly check throughout the day.

In addition certain team members spent much of the day checking Twitter feeds for keywords to try and garner information. The group members also checked several websites that had been setup by other teams where locations were being posted and could be publicly seen. A website that broadcast the live feeds of a network of traffic cameras spread across the US was also used in an attempt to verify locations.

Voice calls were occasionally necessary, mostly to

dispatch people to check and confirm balloon lo-cations. And in one case to call the Tecumseh State Correctional Institute in Nebraska to see if a balloon was visible in the field overlooked by their watch tower (which it was not).

In sum the team predominantly used only two syn-chronous communication media, Skype and Google Wave; with voice calls occasionally used. All other communication media, the list of emails, the Gmail & GVoice accounts, traffic cameras, Twitter, text messages and information posted other websites were asynchronous.

Hunting Method

The hunt began at 10am EST, immediately team members began searching for clues to the where-abouts of balloons using the various media at their disposal

The general pattern of information gathering by team members had them search for leads via the various asynchronous media, where they deter-mined if a lead was miscommunication based on a variety of information including reliability of source and evidence presented. If they judged the lead to be viable or if they couldn’t be sure of whether a lead was fake, they would present it to the team in the Skype chat where a quick discussion usually found the lead to either be fake – based upon information gathered by other users – or it was determined as a possible lead and a community member would be dispatched to verify it. In most cases, a decision on the viability of a lead took only a few minutes.

Once a lead was found and confirmed it was then placed into the Google Wave to stop duplication of efforts by team members (there were occasions throughout the day when it was necessary for peo-ple to leave their computers for a time). The Wave was also used to store the locations of known fake balloons, beyond this the Wave was not used at all during the competition as it was disliked by team members who commented on the fact that it was slow and prone to crashing.

During the challenge, there were bouts of heavy message exchange involving multiple conversa-tion streams being created in the same Skype chat simultaneously. Usually these conversations would each involve two or three team members discuss-ing a specific lead and often other members would chime in opinions or information they had gathered to add to a conversation, usually delineating which conversation they were entering by referring to an established participant of the conversation by name.

Communication in the Skype chat was fairly con-

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stant in the 6 hours the balloons were up with mes-sages being sent at an average rate of one every 10 seconds, increasing significantly when a viable bal-loon location is found.

Outcome

DARPA announced the end of the competition at around 8.30pm EST.. The official winner was a team from MIT who managed to locate all 10 balloons in 8 hours and 52 minutes. At that point the Nerdfighters team had successfully reported the geolocations of 7 balloons, which allowed them to finish 9th (although only 4 teams got more than 7 locations) out of 58 se-rious contenders (DARPA 2010).

Observations from Interviews

Following the project a series of semi-structured interviews were conducted with team members to help better establish the events of the competition and the reasons behind their actions on the day.

Team members indicated that their reasons for choosing Skype as the overall ‘operations centre’ for the Nerdfighters effort was mostly to do with their familiarity with the application and their knowledge of it’s capabilities. They found it suitable for large group chats and all team members had used Skype in that capacity before.

Participants also indicated that they, at the very least, coped well with the multiple conversation streams that tended to occur in the Skype chat. Several team members indicated that they had ex-perience of keeping track of multiple conversations without difficulty. None of the team members indi-cated they were unhappy or had difficulty coping with multiple conversations taking place at the same time, although one did mention that:

“…if there [are] more intellectual conversations I’ll take nothing from it.”

With respect to the other aspects of the chat, users indicated that they were able to interpret the use of emoticons and abbreviations by other team mem-bers fairly easily, one member noting:

“…emoticons are sometimes necessary to convey a spe-cific emotion that is had [sic] to determine over the in-ternet, like sarcasm.”

Although there was evidence of mixed use of emoti-cons, no user indicated their use had negative re-sults.

Participants also indicated they highly valued the ability to review messages before they sent them and

also to view the chat logs to aid in their understand-ing. This is especially true of the non-native English speakers who tended to regularly edit their messag-es before sending them. One participant, who had recently been made partially blind, felt this ability was particularly useful to them as they were prone to making mistakes whilst typing.

Participants also indicated they mostly reviewed longer more impersonal messages and that in in-formal situations they tended to not use this ability. Users indicated that reviewing statements did slow the flow of a conversation, usually to a degree not readably noticeable to other participants. However, they also state that they viewed the capability of ed-iting messages to be highly beneficial to conversa-tion flow overall.

Lastly participants were asked about how they used the chat logging abilities of Skype. Participants indi-cated they valued the ability to refer back to previ-ous statements in much the same way as the valued the ability to edit messages, they believed it reduced the chances of miscommunication and transmission of redundant statements.

Analysis and Discussion

The first two main hypotheses of MST are that con-veyance requires low media synchronicity and con-vergence high media synchronicity. Evidence from the study supports these hypotheses.

Firstly, the team used media with low media syn-chronicity to perform convergence tasks fitting with the predictions of MST. Usually these media were asynchronous, with the exception of the limited voice calls which were made. The calls were used mostly after a convergence process to act on the teams understanding about a particular lead, then individuals would call a contact to confirm bal-loon sightings or get details regarding false leads and then bring that information back to the group – a conveyance processes. But again the use of voice calls in this capacity fits the prediction of MST that the use synchronous media does not guarantee syn-chronicity (Dennis and Valacich 1999). Overall the use of media with low synchronicity was highly suc-cessful in helping individuals form ideas from the raw data they were gathering and at no point was media of high synchronicity used for the purpose of conveyance.

For convergence processes the study shows that me-dia of high synchronicity were used by the partici-pants of the study. Of the three synchronous media available to the team (Skype, Wave and voice calls) only Skype was used for convergence, although Wave was originally going to also be used for this

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purpose as well. However it was decided early on, due to most team members dislike of the applica-tion, that it wouldn’t be used due to the flaws in its design, which often made it behave in an asynchro-nous fashion. The team instead chose to use a Sky-pe chat as an ‘operations centre’ where they would discuss information bought to them by various par-ticipants and form a shared understanding around whether or not a lead was genuine and should be investigated, or whether it was false. They placed confirmed locations into the Wave to show that it had been found, thus re-purposing the media for use as a mechanism for conveyance because it could not adequately support group discussion. This fits well with the predictions of MST, not only because me-dia of high synchronicity were used for convergence but also because when a media that was intended to be used for convergence (and thought of by the group as being synchronous) proved to be of low synchronicity it was repurposed. The observations about which media the team used for conveyance and convergence processes support MST by show-ing that effective task performance was achieved fol-lowing the hypotheses of the theory.

Dennis et al.’s (2008) additions to MST state that certain media capabilities can have an effect on the synchronicity of a medium, the results show some interesting evidence in relation to MST hypotheses in this area.

(H1) - Transmission velocity increases synchronic-ity.

While the study cannot provide much evidence to support this statement there is a complete absence of evidence refuting it. The team uses Skype for their convergence processes and this media has an extremely high transmission velocity. The study does show that messages were transmitted at a fairly constant rate during the task, increasing rap-idly when the team was trying to gain a shared un-derstanding about a possible balloon location. This evidence does therefore lend some support to this aspect of MST, but it is by no means conclusive.

(H2) - Parallelism reduces shared focus and lowers synchronicity.

Participants agreed that parallelism had little im-pact upon the ability to reach a shared focus. In fact, evidence from the transcript shows that by having multiple conversation streams the team was able to work on more than one piece of evidence at a time. This is an effective argument in favour of paral-lelism, but only to a point, as noted by some team members eventually multiple conversation streams become too much and can make it difficult to work out what is going on. The evidence therefore sug-

gests that MST’s prediction of a parallelism having a negative impact on synchronicity is not correct in some circumstances and there are cases where it can aid in increasing synchronicity.

(H3) - Using symbol sets to aid in understanding in-creases media synchronicity.

The results from the study confirm this prediction, as many users felt that symbol sets, such as emoti-cons, were very useful in aiding to a conversation by conveying emotions that can sometimes be un-clear in text form. Thus they help to increase syn-chronicity by reducing the encode/decoding time in message exchange.

(H5) - Rehearseability and reprocessability will neg-atively impact synchronicity by lowering shared fo-cus.

The research does not support this prediction. In-terviews showed that while participants tended to agree that rehearseability and reprocessability did reduce the rate of message transmission to a lim-ited degree, this was greatly offset by the positive effects. Participants viewed the ability to edit mes-sages and refer to older messages as very useful tools. Editing was valued highly, especially by for-eign language speakers and those with disabilities, as it allowed participants to correct simple mis-takes. These findings fit previous work by Walther (1996) who suggests that rehearseability allows for better structured statements. Thus, as the par-ticipants have stated, rehearsed statements reduce miscommunications that would heavily impact the conversation flow, slowing down the ability of the group to reach shared understanding. These find-ings directly oppose the predictions of the impact of media capability as stated in MST.

The study indicated much support for MST espe-cially in predicting how media choice effects task performance for different communication processes, however the study does show that for this virtual team some of the assumptions about media capabili-ties which are predicted by MST do not hold. Why this is, is not clear however it is reasonable to posit that this could well be the result of the origins of the team, namely the fact that they’re all members of an online community. As members of an online com-munity participants extensively use mediated com-munication tools in their personal (and, indeed, in some cases professional) lives and this may make them able to experience parallelism, rehearseability and reprocessability without negative effects on syn-chronicity.

If we assume that one balloon location can stand as one ‘task’ of this challenge, then in using media of

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high synchronicity for convergence processes and media of low synchronicity for conveyance process-es the team managed to effectively complete 8 out of the 10 tasks within a 10 ½ hour period. In success-fully completing tasks using a variety of communi-cation media for differing communication processes with different levels of synchronicity, the actions of the team fit and support the main predictions of MST. This is shown again in the high relative perfor-mance of team, finishing 9th out of the 58 challeng-ers in the competition, which is considered a favour-able outcome overall.

Conclusion

Implications for Future Research

This study concentrates on only a single environ-ment in which MST can be implemented. Future studies into MST need to investigate the theory in other environments to increase the amount of em-pirical evidence available so that a fair conclusion can be drawn on the theory.

The results of this study also show the importance of investigating the impact that online communi-ties have on virtual teams, specifically what aspects of the online community improve the task perfor-mance of the team. As the evidence from this study has shown, the reactions of the virtual team to some media capabilities are not as expected and further research is needed into why this occurred – and in-deed if the claims are true. It would also be of benefit to conduct a similar study to this one with multiple participants from multiple online communities and compare the results from these teams to determine if the results of this study were anomalous.

Limitations

The major limitation of this study was that only one team was the subject of the investigation. This did not allow for comparisons to be drawn or for the possibility of anomalous results to be dis-counted. Unfortunately access to the details of the other team’s participation in the study could not be gained. Although there is a report published by the winning team (Pickard et al. 2010) this concentrated on the method of creating a network of contacts and not on the core strategy for collecting information and completing the task. It is possible that some in-formation that could be of use to aiding this study is held by DARPA, but is unlikely that they will release this information.

Summary

The analysis of this study contributes well to the re-search on MST, virtual teams, online communities

and the general body of information systems re-search. The study also answers the call for more re-search into Media Synchronicity Theory, especially in its modified form (Dennis et al. 2008), and finds support for its core elements. MST itself services to fill a gap in the research by explaining the success of teams that use asynchronous media to successful complete complex tasks in direct contradiction to MRT and Social Presence Theory (Short et al. 1976; Daft and Lengel 1983; 1986).

However, some of the predictions of MST do not fit with the results of the study. Namely, predictions as to the effect of media capabilities on the levels of synchronicity were largely contradicted by the re-sults of the study. Whilst evidence agreed with the prediction that transmission velocity and correct use of symbol sets would increase media synchronicity, in line with MST, they also show that parallelism, rehearseability and reprocessability do not lower media synchronicity, although they don’t necessar-ily increase it either.

The reasons behind the contractions are not clear, however it is reasonable to assume that, given the success of other studies in supporting these aspects of MST (DeLuca and Valacich 2005; Hassell and Li-mayem 2010), that this could be a result of the vir-tual team in the study being made up of members of an online community. We can reasonably posit that the experience that members had using CMC on a regular basis as part of this online community, and beyond it, had an affect as to make them eliminate negative effects of parallelism, rehearseability and reprocessability. Of course it is also possible that these findings are not related at all to the partici-pants’ backgrounds but are, in fact, due to failures in MST at predicting the impact of media capabilities; more research on this will need to be conducted.

Overall this study finds evidence supporting the core of MST and, despite finding contradictory evi-dence, concludes that it is a suitable theory for pro-viding insight into how the media choice of teams can enhance their ability to carry out complex tasks.

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Acknowledgements

I would like to thank Casey Claiborne and Sara Dodson for their valuable support, comments and critique. I would also like to thank John and Hank Green and the Nerdfighters for their continued and astounding ability to be awesome, without them this research would not have been possible.

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KEYWORDS

Newspaper Business

Innovation

Commercial Content

Mobile Devices

Resource-Based View of the Firm

ABSTRACT

The newspaper industry is competing in an increasingly competitive market causing newspaper organizations to be innovative with their business mod-els. This paper looks at newspapers from the perspective of Information Sys-tems (IS) to analyse potential avenues for improvement. It discusses two key opportunities – commercial content and mobile devices – that are currently utilised but early in their implementation. Newspapers have the potential to leverage their existing relationships with advertisers into new applications that actively deliver commercial content to the users beyond traditional ban-ner advertisements. Mobile devices bring the content back into the hands of users, a prominent feature of the physical newspaper but one with limited availability on the desktop PC. The intent is not to detract from the core focus of the newspaper – the journalism – but to enhance the subsidisation efforts that help produce and deliver the content to readers. These findings are based on interviews with business managers of a regional newspaper in the United States. The interview data was analysed through a lens of multiple theories relevant to IS. The resource-based view of the firm (RBVF) allowed an in-depth perspective internal to the organisation that led to the acknowl-edgement of the relationships with advertisers and the ability to extend be-yond advertising into commercial content. Institutionalism helped describe the on-going discourse of the marketplace.

Corresponding Author Email Address: [email protected] (K. Hoback)

Newspaper Business Model Innovation from the Perspective of Information SystemsUtilizing Commercial Content and Mobile Devices

Kyle HobackMSc Analysis, Design and Management of Information SystemsInformation Systems and Innovation GroupDepartment of ManagementLondon School of Economics and Political Science

Introduction“Information wants to be free. Information also wants to be expensive” (Brand 1989:202). Brand (1989) elaborates, saying information is “too cheap to meter” because of the lack of expense in distribu-tion, copying, and recombining but also expensive “because it can be immeasurably valuable to the recipient” (ibidem:202). What he fails to mention is that “information is costly to produce” (Shapiro and Varian 1999:3). Lanier even elaborates that “informa-tion doesn’t deserve to be free” (Lanier 2010: 28). The newspaper industry is struggling with this tension, especially as the internet has increased competition in the market for news (Economist 2006).

In the past, newspapers competed directly with other newspapers and only indirectly with radio and television. Not only do these media firms now compete directly, but non-professionals must also be considered. Lessig (2004:43) argues strongly for non-commercial entities because they “can obsess, they can focus”, whereas commercial groups like news-papers must keep things moving to keep things

selling. Benkler (2006:4) has also written about the attractiveness and effectiveness of non-proprietary models; however, while arguing that “we have in fact seen the rise of nonmarket production to much greater importance”, he still claims that commercial mass media is “necessary for a liberal public sphere” (ibidem:262). With the direct and intense competi-tion, newspapers are being forced to re-think their way of doing business, thus undergoing business model innovation. Their long-running model of sell-ing a unique physical artefact featuring journalism subsidized by advertisements has not often transi-tioned well to electronic means, leading to newspa-per decline (Yardley and Perez-Pena 2009) and de-mise (Rocky Mountain News 2009). Even Google, whose news application reduces the prominence of individual brands, is concerned they will not have good content to link to (Fallows 2010) and are offer-ing assistance (Schmidt 2009). “We need…journal-ism” (Shirky 2009a) and newspapers will continue attempts to deliver but must make changes.

The case study in this paper was created from in-depth interviews of newspaper business managers. Because of their focus of selling the product, they were queried about their approaches towards the in-

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novation of their business models. The findings are analysed with theoretical lens of multiple theories for a full picture of the individual organization and marketplace.

This paper argues for newspapers to consider two main opportunities: commercial content and mobile devices. The first relates to fixing current, dominant models, such as paid content and online advertising, but the focus of this paper is on commercial con-tent, which extends traditional advertising beyond placing rectangles on screens or paper. The findings from the study indicated that there are long-term relationships that the newspaper organizations had built with its advertisers that want to get informa-tion to potential customers. Newspapers have great opportunities to provide new channels to do so. One frequently mentioned topic in the study is a daily discount service, which actively connects the busi-nesses with readers, going beyond a traditional display advertisement. Furthermore, the intrigue of mobile devices – mobile phones, smart phones, tablet computers – has substantial potential. A key argument of this paper is that mobile devices bring the content back into reader hands. The physical newspaper conveniently and efficiently packages content in a portable product. Even laptop personal computers (PCs) require a printer (and other parts) or a desk to provide mobile content, whereas mobile devices vastly increase portability.

These opportunities are presented as considerations for newspapers being forced to shift focus from pa-per to digital. Journalism remains the core, but to cover production costs, this paper argues that news-papers should subsidize with commercial content and mobile devices. This paper aims to provide the reader with a description of changes and improve-ments to the newspaper industry. Its goal is to de-scribe issues and paths available for the transition-ing newspaper industry. Thus, this paper attempts to answer the question: in a marketplace with in-creased competition, how can newspapers utilize an information systems perspective to innovate their business models?

This paper begins by reviewing literature on busi-ness model innovation, paid content, advertising, mobile devices, and relevant, inter-disciplinary aca-demic theories. This theoretical lens is then used to analyse a case study generated from interviews with business managers. The paper then concludes with final remarks, limitations, and avenues for future re-search.

Literature Review

This paper follows the premise that no single theory can encompass all aspects of the real world, utiliz-

ing multiple theories to analyse the newspaper case study. This section reviews some of the literature on business model innovation and the newspaper con-text of paid content, advertising, and mobile devices. This section ends with a look into the resource-based view of the firm and institutionalism.

Business Model Innovation

A simple definition of a business model is the com-pany’s story (Margretta 2002) of its value, operations, revenue, costs, and profit (Chesbrough 2010). Afuah and Tucci (2003) aggregated many classifications into the context of the internet: commission (revenue per transaction), advertising (displaying external content), mark-up (selling an external product), pro-duction (creating a product), referral, subscription (unlimited use), and fee-for-service (metered use). A similar definition has been created for the context of mobile devices (Coursaris and Hassanein 2002). Content providers often pursue business models that sell the content (subscription or pay-per-use) or access to customers (advertising).

In a larger theory of Orlikowski’s (1996) Situated Change, organizations must undergo constant im-provisation, which may include the way the orga-nization makes money, thus business model in-novation. Chesbrough (2006) tasks it to all senior managers to alter their methods of creating value and retaining a portion of that value. But it is more than just delivering on customer requests to alter the business for increased sales (Bower and Christensen 1995). Companies must also avoid situations where they get “hurt by the very technologies their custom-ers led them to ignore,” e.g. Xerox copy centres and IBM mainframes (Bower and Christansen 1995:44). Business model innovation is a difficult decision-making process of taking resources currently as-signed to customer retention and re-allocating them to research and development (Bower and Christan-sen 1995), effectively taking short-term risks for long-term gain.

Researchers have tried with limited success of busi-ness model innovation to determine the best pro-cesses. Zook (2007) found that companies with the most success did not venture far from their current business. As an example, he uses Apple’s “flair for software, user-friendly product design, and imagi-native marketing...[for] more than just computers” that helped them move beyond computers (Zook 2007:70). Zook (2007) attributes the success of these companies to a gradual transformation from one re-peatable formula to another with the utilization of hidden assets and the ability to attain cost and price leadership. But in relying on hidden assets, he may give too much emphasis to planned foresight. Even Steve Jobs (2005), Apple’s CEO, has admitted “you

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cannot connect the dots looking forward; you can only connect them looking backwards.” Govindara-jan and Trimble (2005) discuss creating a completely new sub-organization that must balance useful piec-es of the parent organization while still maintaining a fresh, autonomous feel. They admit, however, that that it was easier to discover failures than it was to recreate formulas for success (Govindarajan and Trimble 2005).

A common perception of business model innova-tion is scientifically experimenting with hypotheses, tests, and revisions (Magretta 2002). Chesbrough (2010) argues that companies must experiment with their business models, knowing that some will fail yet even failure will provide learning opportunities that can be applied in the future, taking on elements of Structuration Theory, where the past creates the foundation for the current environment (Giddens 1984; Orlikowski 2000). Chesbrough (2003; 2006) has argued for the need to open up and accept external ideas to enhance their own innovation with respect to their product or service and the business associ-ated with it. A significant portion of the business model is looking at what can be sold, which is inves-tigated next in the context of newspapers.

In a Newspaper Context

With the proliferation of the internet, content is in abundance. However, newspaper and other media outlets have long-standing brands and processes, supported by significant financing, that provide pro-fessional levels of journalism. This section explores their many have attempted business model innova-tion.

One impending decision facing all newspapers is whether or not to institute a paywall. Despite con-cerns of attempting a paywall (Shirky 2009b; Carr 2009), some have been long-running (e.g. www.ar-kansasonline.com, www.abqjournal.com), retracted (e.g. www.valleymorningstar.com), recently-added (e.g. www.timesplus.co.uk), or simply announced (e.g. www.nytimes.com). But the decision is only part of it; implementation is another issue. Exten-sive research has looked into information systems resistance, attributing it to social inertia (Keen 1981), political factors (Markus 1983; Walsham 1993), and the formation of hostile groups (Lapointe and Ri-vard 2005). Theories to mitigate resistance, such as increasing perceived value (Kim and Kankanhalli 2009) could help, but the often-successful mecha-nism of heavy top-down communication (Pramatari et al. 2009) is less available outside of a formal orga-nization, as in the case of newspapers. These com-plications may push newspapers to look elsewhere.

On average, advertising comprises sixty to seven-

ty per cent of newspaper revenue (Manduchi and Picard 2009). While an increase in circulation would drop the cost per reader and raise revenue and prof-its (Manduchi and Picard 2009), reduced circulation has increased the dependence on advertising (Kind et al. 2009). Revenues from media products increase if they align more with audience viewpoints (Kind et al. 2009), enabling targeted advertising (Roger 2010).

Advertising often has the perception of being dis-liked or unwanted, but it is often a desirable compo-nent of media bundles (Depken and Wilson 2004). The more easily the ads can be ignored, the more value they provide (Becker and Murphy 1993). Thus, they have different effects on different mediums (Dahlén et al. 2003). For example, the internet and newspapers are best for products like cars and luxu-ry watches, whereas television fits great with soaps and shampoo (Yoon and Kim 2001).

As brands deliver trusted information, newspapers are situated well to do this by bringing together their large portfolios of companies and readers. Clemons (2009), with help from the Economist (2006) posits that online advertising is not enough to support all web content. Despite the potential for benefit, eye tracking has confirmed that ads are often ignored online (Mosconi et al. 2008). Despite click-through being a common metric for success, banner ads still increase brand attitude without click-through or advertisement recall (Dahlén et al. 2003). Instead of thinking of all this information as advertisements, this paper discusses the broader topic of commer-cial content that is actively sought out by consum-ers rather than just distracting them. Mahadevan (2000:64) argues for the need of intermediaries to prove the accuracy of value of information, provid-ing “revenue streams linked to exploiting informa-tion asymmetry”. Orgad (2008) references Maria Mandel of Ogilvy Interactive in saying that adver-tising, especially location-based and time-sensitive ads will be actively pursued by customers, and that advertisers will be able to get personal with mobile users and customize advertising to individual hand-sets, as well as increase interactivity around a brand with ‘advergames’.

The mobile phone, along with keys and cash, com-prise the three essential items regardless of gender or culture that most people carry with them (Chip-chase et al. 2005). Mobile phones have the advantage of being a platform for applications that have high mobility, personalization, and large user demo-graphics (Rashid et al. 2008), offering the ability to individually target and collect demographic data. Privacy concerns make this a tough issue (Laszlo 2009), requiring functionality for users to actively accept or reject the receipt of commercial informa-tion (Rashid et al. 2008).

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Moving from the PC into mobile devices provides newspapers a great opportunity, yet not without dif-ficulties. While Laszlo (2009:28) predicts that mobile devices will become the “next great advertising me-dium”, content developers need strategies tailored to the small screens of mobiles (Orgad 2008) with each device having special needs (Nielson 2009).

Resource-Based View of the Firm

The resource-based view of the firm (RBVF) is used to look at the newspaper organization internally. RBVF helps identify, develop, protect, and deploy resources and capabilities to attain competitive ad-vantage (Amit and Schoemaker 1993). RBVF fits within strategy, organizational economics, and in-dustrial organization research (Mahoney and Pandi-an 1992) and can be useful in providing a direction for the firm (Andreu and Ciborra 1998). Criticisms of RBVF include its self-verifying, context-specific nature without delivering extensive prescriptions (Priem and Butler 2001) and its limited usefulness to IS due to IS resources not contributing a direct influ-ence to sustained competitive advantage (Wade and Hulland 2004).

However, actively embedding IT in core capabilities can increase competitive advantage (Andreu and Ci-borra 1998). The newspaper has long been a system of delivering information to its readers, even when it was only creating non-digital information artefacts. The newspaper has been a complex information sys-tem of determining news, its importance, and how to arrange it in a usable product. This is further com-plicated by advertising aligned next to journalism to subsidize the cost, as circulation revenue does not cover the full price.

This paper utilizes the specific framework of An-dreu and Ciborra (1998) that defines resources – any available factors owned by a firm – that can become capabilities with the aid of organizational routines – the company’s way of doing things, learned over time – and potentially a core capability – valuable, rare, and imperfectly imitable with no equivalent way of accomplishing same thing.

Institutionalism

Institutionalism is used to describe the discussions of the firms in the marketplace. Organizations often look to similar organizations they perceive as suc-cessful, potentially creating isomorphism, where organizations copy and mimic other firms within a common or similar environment (DiMaggio and Powel 1991). The core argument in the institutional-ist theory of organizations is that formal structures and processes are maintained not because of ef-ficiency but because of power myths of shared as-

sumptions about their functionality and necessity (Avgerou 2002).

Swanson and Ramiller (1997) argue that an “inter-organizational community, comprised of a hetero-geneous network of parties with a variety of mate-rial interests in an IS innovation, collectively creates and employs an organizing vision of the innovation that is central to decisions and actions affecting its development and diffusion” (ibidem:459). Their or-ganizing vision, then, is a product of the community members that make sense of an innovation (Swanson and Ramiller 1997). They define the basic functions as comprehension (gradual learning), adoption (the rationale for its existence, the “know-why”), imple-mentation (bringing it about), and assimilation (dif-fusion throughout) (Swanson and Ramiller 2004). Overall, the process produces a title – a buzzword – into the community discourse where many people shape the definition and incorporate insight from early adopters (Swanson and Ramiller 1997). The in-stitutionalism research, including organizing vision, is relevant due to the large community of stakehold-ers. Of the many business model innovation possi-bilities, many – if not most or all – are debated in a combination of media.

Research Methodology

For a deep perspective on the business model inno-vation of the newspaper industry, business manag-ers were targeted. The original goal of newspapers was to place news in people’s hands. Advertising space was sold alongside news to pay for the pro-duction of the newspaper and increase profits. To allow for an exploration of depth and context (Cornford and Smithson 1996), this paper utilized a qualitative research process comprised of semi-structured interviews instead of conducting a sur-vey. Semi-structured interviews balance the rigid-ness of a structured interview with the flexibility to adjust the questions based on responses (Cornford and Smithson 1996).

This qualitative approach was not attempted with-out considering drawbacks, including longitudinal characteristics of the observations and the poten-tial bias of the interviewee (Cornford and Smithson 1996). Caution was taken with this paper to include what has occurred within the organizations and by the individual interviewee, despite the temptation to include interesting predictions and industry-wide insight. Another drawback includes the textual na-ture of each interview with distinctive character and context that can easily be lost or misunderstood when summarizing or aggregating the interviews together (Cornford and Smithson 1996). These in-terviews were conducted under the assumption of anonymity and thus, presented anonymously, pro-

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viding even further problems for summarization and aggregation. This was taken into consideration when presenting the case study.

The research involved conducting eleven interviews, with each of the interviewees located from snowball sampling (Esterberg 2002). Eight interviews were with business managers of a regional newspaper or-ganization in the United States (US). Each interview was accompanied by an interview guide (see Appen-dix A), with slight customizations for each interview based on their individual roles and backgrounds. Outline notes were taken, along with recordings. Each interview was reviewed multiple times, with full transcriptions taken of key sections and individ-ual quotes. Some interviewees were re-contacted to clarify or elaborate on key points.

Findings

The group of newspaper business operations person-nel all worked for the same media organization. This US employee-owned company controls the main newspaper of a metropolitan area with regional dis-tribution – its flagship paper – as well as other small-er local newspapers across two neighbouring states. The main focus of the business is their commitment to the local area. One manager stated, “Local is the key. I think that is what will always separate us.” For the purpose of this paper, this organization will be referred to as the “regional US paper” and each person interviewed will be given the generic title of “business manager”.

The main newspaper has been in existence for al-most 125 years, but like the rest of the media indus-try, it is going through changes. Circulation is down, as one business manager stated, “We’re not as bad as other newspapers, [but] we’re still down.” Their long existence, while providing long-running expe-riences for the organization, has its disadvantages, as another business manager articulated, “It’s tough for big ships to turn easily. You might have to get a bunch of little ships.... We did something the same way for 100 years, and we spent some painful years trying to unlearn everything.”

Like other newspapers, a key problem is moving away from the profitable printed newspaper. One manager stated, “Right now the printer product is the core product, that’s the mothership where we raise a lot of income.” The main reason for the news-paper artefact’s respect is that it acts as not only as a presentation tool for journalistic content but also as a great vehicle for displaying advertising. One manager directly stated, “Most of the revenue comes from advertising. That’s the driver.” With advertis-ing driving profit, that then drives the ability to de-liver quality news. “The news room’s size depends

on the profit level of the company,” one said.

The long-established business had led to a much-respected brand, one that is held dearly to the com-pany. “You’re only as good as your name,” one man-ager said, although all articulated the same in some fashion. This does have its drawbacks, as a manager stated, “People copy and paste our articles all the time. ...What they don’t understand is we spend mil-lions of dollars a year generating that content, and it’s not free. It costs us a lot of money to provide that.” If they can keep their content under their logo, it provides added benefits, as one manager provid-ed, “There are other places they can go, but if we keep them, and let them know that we have it, they don’t have to jump around a lot.” And this can lead to other opportunities, such as one described by one of the managers, “[Layar] is one of the ways where we feel we can partner with a third party that already has an audience to drive more traffic our way.”

Two recent initiatives dominated the interviews. The first is a blog for mothers in the local area. This verti-cal structure has been a very popular meeting place, despite the ease of mothers being able to start their own blogs, leading to high advertising revenues. The other main initiative sells discounts that lever-age group buying – a minimum number of people required for the discount to take effect. This general-ly involves selling gift certificates at a reduced price but has been used for other items. The concept was mentioned in many of the interviews and is similar to offerings from Groupon.com and LivingSocial.com.

Analysis and Discussion

The newspaper organizations all have changes they are dealing with. Business model innovation is con-sidered first by looking at the organization via RBVF. This is followed by considering the organizing vi-sion of commercial content and mobile devices.

The Individual Organization: Business Model In-novation

The newspaper is actively attempting business model innovation. As one of the business manag-ers stated, “The business model needs to change”. This paper utilizes the RBVF to describe the regional newspaper’s long-successful print product in at-tempts to determine how contemporary information systems can attach to the core capabilities of the firm.

The first step looks at resources. People are a vital component, including the journalists writing the content, advertising representatives, and advertis-ers, along with many others associated with editori-al, business, and operational tasks. The newspaper,

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for their flagship product alone, employs 179 people in the newsroom and 118 in advertising. Other re-sources include the hardware (e.g. printer, distribu-tion trucks), software (e.g. content management sys-tem - CMS), and materials (e.g. paper, ink, fuel). This basic list includes a segment of the equipment and tools that the people utilize to create a product to put in the hands of customers.

The next step combines these resources with orga-nizational routines to form capabilities. The capabil-ity of creating quality, in-depth journalism includes journalists providing content Stories often have a word count associated with them, put in place by the editors. In addition to the journalism, sales rep-resentatives work on the capability to sell adver-tising and maintain relationships. The regional US paper usually offers a commission per sale, but for some long-running relationships, a house account is created with a certain level of advertising expected over time, e.g. a large furniture store or automobile dealer. These advertisements are then presented in a format in the hands of potential buyers. Combin-ing these, the newspaper has created the capability to bundle all the content into a routinely distributed artefact.

A core capability must be valuable, rare, imperfect-ly imitable with no strategically equivalent substi-tutes (Andreu and Ciborra, 1996). The newspaper is a trusted, 125-year old brand purchased by, and thus in the hands of, nearly seventy per cent of the local households and countless other businesses and schools. Adding this to previously mentioned capabilities and their long-running trust, the core capability for these regional newspapers would be routinely delivering a trusted bundle of in-depth news and advertising that is usable, accessible, and portable.

Marketplace Actions: Advertising and Commercial Content

The large array of advertisers is used to reduce the costs of the readers. As this paper has mentioned, professional, branded journalism is expensive to produce. The advertising has been important to the bottom line profitability. In Swanson and Ramiller’s (2004) framework, the printed product is very much in the assimilation phase, although different aspects move back through comprehension, adoption, and implementation. The newspaper has made upgrades to both its print and online products to better accom-modate advertising. The print product is capable of knowing the distribution postal codes of stacks of newspapers still in production. This allows local tar-geting by advertisers that may only be focused on a small part of a larger geographic area. In online ad-vertisements, the first main concern (and buzzword)

was share of voice, i.e. paying for percentage of screen. The newspaper, however, decided, through testing, that adopting click-through rate (number of mouse clicks of an online ad) was a better metric, with performance the same whether there were two or fourteen advertisements. Thus, the newspaper implemented a design that accommodated the many ads in an organized fashion.

This extended focus on advertising has led to long-term relationships with some advertisers. Even if the relationship with the individual business is not long-term with the newspaper, the reputation within the community is that it is the best way to place adver-tisements into the hands of potential customers and reach a large online audience. Because of this, the relationships have been leveraged to do more than just display ads on a piece of paper or screen. They have been used for demographic targeting online and facilitated transactions.

The newspaper has continued to evolve its advertis-ing offerings, now working on the buzzword of tar-geted advertising by creating vertical content sites. An early implementation is the blog for mothers. While it is not targeting individual people, it does have a defined market. It has been deemed a suc-cess because advertising sold out within two weeks and usage levels have been high. The main bloggers are paid for their contributions, but the forum is open for others to participate. It leans on the trust of the newspaper but also on its advertising relation-ships. There are many alternative blogs by mothers and for mothers, but this blog can be a part of cross-promotional activities and other momentum from the overall bundle of information available from the newspaper. While advertising for mothers is assimi-lated on this vertical site, their targeted advertising as a whole is still in the comprehension phase. They have discussed other vertical sites but have not yet made an adoption decision to move towards imple-mentation.

Group buying is the new buzzword of the newspa-per’s advertising. They saw an opportunity of com-panies such as Groupon and LivingSocial that were essentially giving away free money: people opt to buy a gift certificate at a reduced price. They are not the first to enter the marketplace, but the newspa-per has the distinct advantage of having built a large base of local advertising connections and the ability to sell this in a package with advertising opportuni-ties within the organization. While relatively new, it has been successful enough to make plans for a assimilation to the smaller, local newspapers owned by the overall organization. The services provided by the newspaper are similar to Groupon, and Liv-

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ingSocial, but the newspaper is utilizing its advertis-ing connections, brand name, and other advertising venues to complement and better facilitate this com-mercial content.

Opportunities: Mobile Devices

The newspaper is beginning to utilize mobile devic-es as a key part of its digital delivery to its readers. They recently released an Apple iPhone application and are considering more device-specific applica-tions, e.g. Apple iPad (which they pre-ordered for development purposes), Research In Motion Black-berry, and Google Android. They ran a recent pilot attempt of 2D barcodes and are in the testing phases of implementing augmented reality from Layar, a mobile device application that provides information about physical surrounding based off geographic coordinates.

The consideration of mobile devices leads back to the earlier analysis of RBVF. With the mobile device, readers have access to the content at all times as the devices are with people at all times (Chipchase et al. 2005). Recall that this paper argues the core capabil-ity was producing a trusted bundle that was usable, accessible, and portable. This matches well with the mobile device but not as well with a PC. First, as dis-cussed previously, reading on a computer monitor is less preferred than print or a mobile device (Niel-son 2010). However, screen size is an issue in both instances, especially the mobile phone, as neither matches the large (yet collapsible) size of the print-ed newspaper. Next, accessibility is different. The newspaper requires physical proximity, although, in the newspaper’s case, most places in the local area have their own physical copy. The PC and mobile devices both require connectivity, although mobile devices generally connect to wireless phone signals, which are generally more accessible than wireless internet. Finally, mobility was reduced with only PC access but achieved again with a mobile device. Un-less printed with additional hardware and materi-als, the PC (even a laptop) is bulkier and generally requires a surface for the device or the person to sit on; the mobile device brings the content back into the hands and the fingertips.

There are hints of the organizing vision with specific mobile device applications as well. When the news-paper piloted 2D barcodes, they first monitored places with some implementation, such as Europe. Also, shortly after the test, a non-competitive news-paper in a similar market also ran a pilot. They com-municated to determine what worked and what did not as the pioneer implementers. One easy finding was that the other newspaper had not accounted for all devices, only focusing on the iPhone. In Swan-son and Ramiller’s (2004) model, the newspaper

has moved back to the comprehension phase before again deciding on adoption and implementation. Another application looks at augmented reality with Layar. The buzzword of augmented reality is new, with Google also participating with its Goggles ap-plication. As the newspaper is in testing, it could be considered in the implementation phase, although after its release and similar to its paywall implemen-tation, it will probably move back and forth around the phases before it reaches assimilation.

Conclusions

The mobile device is a strong medium for newspa-pers to pursue. It lends itself towards the a key fea-ture of the physical newspaper: the content is por-table and accessible everywhere. While computers with internet access also have some portability and pervasive access, mobile devices, particularly mo-bile phones, are with people at all times. The news-paper on the mobile device can easily place content into reader’s hands.

In regard to content, this paper is not focused just on quality journalism; it also discusses the need to bundle commercial content that is sought out by the user. This further extends the intrigue of a tradition-al printed newspaper: in addition to the journalism, the content that companies contribute – commercial content – can be useful for readers. Traditional ban-ner advertisements are only a small part. Newspa-per companies have a large portfolio of advertising connections, each of which can be utilized to pro-vide new services that benefit readers, beyond just placing a picture on a screen.

This paper does keep in mind that the real focus of a news organization is the news. Alternative reve-nue sources are designed to make this information as accessible as possible. Time may prove that just selling the journalism is the best business model de-spite recent and continual occurrences of resistance to paywalls. In the meantime, there are many people employed to raise money for quality journalism, the essential piece, of the news organization.

This paper does not try to hide the fact that profes-sional journalism is expensive. Newspapers, with their large news rooms providing in-depth journal-ism and using non-legacy equipment for audio and video, have the setup to compete in a converged medium against traditional magazine, radio, and television news outlets. But that is only part of the battle. This professional version of news must com-bat strong competition from non-commercial enti-ties, often just individuals. With a focus on business model innovation, newspapers can position them-selves to succeed.

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Contribution

This paper focuses on RBVF and Institutionalism as tools to assist business model innovation. Bower and Christansen (1995) point out that customers tend to lead businesses in the wrong direction, perhaps ex-plaining why paid content is not fully implemented and the newspaper in this study are looking else-where to innovate. In using RBVF, this paper hopes to have uncovered prescriptions – a focus on com-mercial content and mobile devices, which Priem and Butler (2001) claim RBVF is not suited for. Furthermore, both of these solutions are involved with the implementation of Information Systems for advantages in the marketplace, which Wade and Hulland (2004) claim do not influence competitive advantage. This paper also uses Swanson and Ra-miller’s (1997; 2004) organizing vision version of in-stitutionalism to help explain the marketplace and the maturity that different buzzwords have attained.

Limitations

The alternative business models presented in the case study have proven successful in the short term but have not been established long enough to consid-er them long-term successes. Additionally, the busi-ness managers interviewed all were from the same newspaper organization in the US. Furthermore, no people from advertising sales were interviewed.

Future Research

This research could be enhanced by combining RBVF and institutionalism to analyse other orga-nizations considering or requiring business model innovation. Within other newspaper organizations, a similar study could be conducted with personnel either all from the same organization or all from the same market.

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KEYWORDS

Systems Thinking

Financial Markets

Financial Crisis

Inter-Organizational Informa-tion Systems

ABSTRACT

The role of inter-organizational information systems (IOIS) has evolved from being a competitive advantage into a necessity in the contemporary intercon-nected environment. The academic literature is rich in discussions on the aspects of governance models of markets and hierarchies, however, limited attention has been paid to the governance of large-scale inter-organizational systems. Research in this area can benefit from more extensive studies of the risk inherent in the inter-organizational information systems for the entire network and not just for the individual participants. Systems thinking can provide an integrated framework for analysis and coordination of complex systems such as the OTC trading networks. By concentrating on the inter-connections created by trading platforms we can identify emergent risk by utilizing transaction data to regulate the increased number of participants in the financial industry. This is an attempt to find a better approach for an early warning system of cascading failure by focusing on the linkages instead of the individual nodes.

Corresponding Author Email Address: [email protected] (Mariya Dimova)

Systems Thinking and Inter-Organizational Information SystemsLessons from the Financial Crisis

Mariya DimovaMSc Analysis, Design and Management of Information SystemsInformation Systems and Innovation GroupDepartment of ManagementLondon School of Economics and Political Science

Introduction

Despite that OTC markets are relatively new, their rapid development is clearly expressed by the num-ber of transactions facilitated by phone systems and electronic platforms (Ferderer 2008). They provided a system to diffuse the credit risk from the booming housing market between 1997 and 2006 as an invest-ment possibility for all interested parties. It started as a technique for active credit risk management and steadily grew into a complex betting system. Less than a decade later it is apparent that this did not minimize the risk in the financial system but spread it outside of the banking sector thus forming the so-called shadow banking system.

According to the Nobel laureate in Economics Paul Krugman, over-the-counter trading’s great potential (and danger) is the fact that it is not limited to sev-eral authorized individuals and thus, everyone can participate (2009). With loosely outlined regulations, buyers and sellers were matched easily, negotiation with electronic messages and voice lines was very efficient and deals were executed in reduced time over trading platforms. The frequency and the size of tranches were greatly facilitated by the inter-or-ganizational information systems but with no auto-

mated coordination and control mechanism in place. Existing literature and best practices mostly focus on the adoption and diffusion of IOIS but the long-term impact of technology in governing the virtual net-works of trading partners has yet to be studied in detail.

Literature Review

Inter-Organizational Information Systems

Inter-organizational Information Systems (IOIS) have gained significant interest among scholars and practitioners. They are defined as automated sys-tems designed to link two or more organizations to support business processes (Robey, Im and Jonathan 2008). Implementation and adoption are no longer optional in the increasingly complex economic en-vironment (Suomi 1992) and with the advent of the Internet and the accelerated growth of on-line trans-actions; the impact of IOIS on economic and social matters cannot be ignored (Chatterjee and Ravichan-dran 2004).

Barrett and Konsynski defined the automation of in-ter-organizational relationships in 1982. Since then numerous aspects have been studied using different theoretical lenses and approaches. Development, adoption and diffusion of technology remain a con-stant source of interest for researchers (Chwelos,

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Benbasat and Dexter 2001: Premkumar, Ramamurty and Nilikanta 1994; Iskandar, Kurokawa and Leb-lanc 2001), but in recent years another topic has caused a lot of interest. With the ability of technol-ogy to embed itself in the core of every industry and to shape the links between individual organizations as well as being defined by the transactions between industries, the impact of IOIS on the governance has become a central point of discussion (Robey, Im and Jonathan 2008).

Inter-organizational information systems have been reviewed to determine which governance structure they support best. Markets, hierarchies and networks have been analyzed using transaction cost theory, resource dependency theory, game theory, incom-plete contracts theory and property rights (Robey, Im and Jonathan 2008; Ibrahim, M. K. 2003). Some argue that reduced transaction costs favor markets, while others disagree and point out the possibility to strengthen hierarchical partnerships with the help of technology (Islamoglu and Liebenau 2007). A sepa-rate branch is dedicated to the influence of IOIS on the development and management of networks as new governance structures, a model that changes the rules of interaction from the episodic nature of the market and the long-term relations typical for hi-erarchies to hybrid forms of structure based on rela-tional exchange theory(Croteau and Bergeron 2009).

Network Economy

The evolution and diffusion of information technol-ogy laid the foundation for network governance linked to the concept of network economy. It is based on the fast growth of the Internet, which serves an innovative form of business with an “electronic ner-vous system”(Katz and Shapiro 1985; Castells 2001). It has a profound impact on the restructuring of the inter-organizational relationships according to its logic. It is defined by alliances formed for the dura-tion of specific projects and then dissolved only to be re-utilized in another context (Castells 2001). More-over, the emergence of the network model further contributes to the shift from a traditional industry based on goods toward the information and services industry (Shapiro 1999). The advance of technology and particularly the emergence of IOIS have allowed remotely located organizations and small businesses with previously unfavorable competitive situation to participate in a more leveled field by creating “op-timal exchange areas” (Concentric 2007).

Networks have now been recognized as impor-tant economic coordination models. Following the framework outline by de Man (2006) we should first identify the nodes that form the network but this is often unclear due to its dynamic nature. Intensity is used as guidance to name the elements of a network

but the residual entities can never be excluded. Fur-thermore, we need to recognize that the network is constructed by individual sub-systems, which can exist autonomously or form other systems. The in-teraction between the nodes is either direct or indi-rect and the pattern of linkages can take any form, which will define the operational and strategic sta-bility of the network. The knowledge spill over can easily turn into a herding behavior making the net-work less heterogeneous and more susceptible to cascading failure(de Man 2006).

Inter-Organizational Information Systems as Con-trol Mechanisms in Business Networks

The research in governance and IOIS is still limited to the discussion of markets and hierarchies (Volkoff, Chan and Newson 1999). Networks however, are more complicated and sometimes unpredictable in nature, which calls for better theorizing of IOIS and their impact as a control mechanism. Management of networked environments is the main area of in-terest for this paper as the theoretical frameworks applied have not yet reached the diversity typical for the IS field. There is a potential for a better con-ceptualization from both practical and academic perspectives (Avgerou 2000). The research domain can benefit from an approach that accounts for the complexity, interconnectedness and emergence of the network economy built on inter-organizational information systems.

The role of inter-organizational information systems has evolved with the existing business practices. Us-ing the basic principles of network externalities the technology contributes to the intensification of the benefits. However, inter-organizational information systems in a networked environment are still evalu-ated unilaterally using arbitrary aspects of inter-or-ganizational relationship studies. They studied for their impact on the individual organizations in the inter-organizational relationship, but the web like nature of networks with their distinctive loops and redundancies is not included in the analysis. Atten-tion is predominantly focused on the implementa-tion, adoption and utilization of IOIS in a network formation. Post-deployment activities are rarely discussed in the specialized literature and analyses are based on contextual variables related to gover-nance, but they rarely form comprehensive models or frameworks to serve as guidelines to researchers and managers.

Numerous theoretical frameworks have been ap-plied (Robey, Im and Jonathan 2008) but the field remains fragmented. Articles are predominantly concerned with individual factors where negative externalities are discussed as the consequences for individual enterprises and not as possible cascading

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failures(Mutch 1996). The aftereffect of the intercon-nectedness is not taken into consideration as a po-tential problem except on the rare occasion when the complexity of the technical artifact is brought into focus. There are no available studies on failures of entire networks, but only of the usability of the IOIS.

Following the conceptual evolution of the litera-ture on the interplay between networks as forms of trading structures and the inter-organizational information systems that facilitate construction of such models, we can see that there is a trend for a rather reductionist approach. This creates a gap in academic literature that can benefit from an inte-grated approach for optimization of IOIS. By using a traditional analysis based on dividing the problem into its constituting parts and then analyzing them to find the root cause for their malfunctioning, we repeatedly miss the big picture. Interconnectedness has emerged as core concepts in defining today’s business and economic and all networks act as com-plex systems with distinctive externalities and is-sues. This research proposes an approach that takes a different outlook on inter-organizational infor-mation systems to show how data elements can be studied to avoid potential shocks to entire networks and improve management practices.

Theoretical Framework: Systems Thinking

As an alternative to traditional analysis, which is based on the idea of “divide and conquer”, systems thinking has emerged as a new framework for un-derstanding problems. It teaches us to look into ob-jects in their entirety. Systems thinking teaches us that the whole is more than just the sum of the parts. This method has significantly changed the way we think and has been extensively applied to various fields of science, technology and management. It has helped us develop a more integrated approach to the way we define complex systems and solve problems (Ackoff 1971).

At the center of the system thinking concepts is the idea of interconnectedness and interdependency. This encourages managers to identify the larger pat-terns of interaction between the elements from which problems materialize. The interactive processes are fundamental for the systems existence and under-standing the technical and emotional linkages helps to manage the situational complexity (Espejo 1994). The events on all levels impact the performance and operational efficiency of the system and the ripple effects are common reality in an interconnected world. The mechanisms are linked into a workflow which often resembles more cycles and loops than a linear graph with a definite start and end. Local be-haviors can have a far-reaching effect (Espejo 1994)

and reaching stability of the systems via self-orga-nizing and learning is the goal for the thinking man-ager . The linear approach of analysis is limiting the deductive skills of managers, as it does not account for different perspectives (Chapman 2004).

Boundaries

The difference in the perspectives can be due to vari-ation of the boundary definitions. They should al-ways be temporary to allow for adjustment accord-ing to the situation, and to make sure that relevant elements are not excluded. By setting the boundar-ies we always leave something out of our analysis and thus we create the environment in which the systems we study exist. The interaction between the system and the environment never ceases to exist and there is a state of coupling, which is maintained until the system is redefined(Rubenstein-Montano 2001). This is enacted by feedback loops. They can be balancing and amplifying. A steady state can be achieved but it is not necessary synchronized with the established goal of the system. A complemen-tary concept in system dynamics is the idea of de-lays. They explain why the reaction to some events is not visible immediately but it is sometimes distant in the future or happens gradually. Accounting for delays helps us manage the feedback loops well in accordance to the goal-seeking nature of the system (Daum 2001).

Emergence

With the adjustment of the boundaries of the studied system the mechanics of it change as well. Through the feedback loops the system exhibits properties that are not observed in its elements. The whole now possesses characteristics that cannot be explained by what is known of the constituting elements and thus “the whole is greater than the sum of its parts” (Flood 2010). This is why the holistic approach is a better educated method for understanding the world compared to the traditional analysis, where individual sub-systems are studied. Appreciating and incorporating the concept of emergence in man-agement is the most fundamental idea of systems thinking (Chapman 2004).

Communication and Control

Within this network of interconnected elements and various levels of hierarchy, communication and control are crucial for the existence of the systems concept. Flow of information is a necessity for the system to be able to respond to the environment and adapt to changes through the feedback loops. Organizations and industries are often discussed as complex webs with technology facilitating the in-formation flow (Espejo 1994). An information sub-

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system is one that collects and distributes sufficient information about events in both the environment and the system, enabling a timely and effective re-sponse. Complementary to communication is con-trol. The raison d’être of computerized information systems is the belief that computers puts managers in command so they can make sensible decisions, and hence control their organizations successfully. However, the accrual of other components and sub-systems, feedback, the reality of emergence and synergy, the development of new systems and the breakdown of old systems due to interactions with the environment, imply that there can be no per-manent control over a system that is continuously evolving and emerging.

The Systemic Nature of the Financial Crisis

Losing control over a system ultimately results in a systemic failure. A very good example is the recent financial catastrophe where the ideas of interdepen-dency and interconnectedness took central stage in the economical downturn. The flawed credit scoring from the subprime mortgage market spread through the feedback loops of trading and caused cascad-ing failures that eventually engulfed all participants in the industry. Isolated events travelled along the information highway but the lack of proper regu-latory mechanisms for network governance led to the instability of the system. This poses the ques-tion of whether we could have used some of systems thinking analytical tools and approach to evaluate the situation to avoid the events that unfolded not so long ago.

Financial Crisis - Findings and Analysis

When using a systemic approach, it is not enough to take a snapshot of the current state of the system we are studying; it has to be evaluated according to its time and space dimensions as it helps to clarify the root causes that led to the tipping point. With the advance of the economies of developing countries and with a few attractive investments prospects, the housing market loomed with promises of high re-turns especially in the subprime sector (Crouhy and Turnbull 2008). Increasing prices of the houses and the high interest rates available for investors are only one side of the coin (IMF 2005b). Further encourage-ment for wide participation in the derivative market was created through the “lowering and removal of regulatory barriers” for banks to participate and to raise capital through bonds and equity (IMF 1998; 2003). These events are rarely included in the analy-sis of the financial crisis, but they are crucial pieces of the puzzle as they created the necessary condi-tions for the events to follow.

Primary Mortgage Market

The mortgage cycle starts with an individual apply-ing for a mortgage. As the demand for high yield in-vestment instruments created on the secondary mar-ket increases, the requirements to qualify for a credit become more relaxed, stimulating the growth of the subprime mortgages. The subprime mortgages are sold to government sponsored enterprises (GSEs). The bank then repackages the loans in the form of collateralized debt obligation (CDO) and offers them to investors in order to free up assets and lend more money (IMF 2006). If people cannot pay the mort-gage, the investment firm re-posses the houses. The prices of properties had been growing for an exten-sive period so it remained a sound investment on paper for a long period.

Even though the mortgage industry has been slow in adopting new technology, the automated underwrit-ing is considered as the one most crucial IOIS in the field. The speed of evaluation, communication and negotiation of the final lending policy increased sig-nificantly. The efficiency of the origination process increased the flow of debt into the financial system

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Figure 1: US Yields (IMF 2005b)

Figure 2: US Home Mortgages and Financing Instru-ments (IMF 2005b)


thus creating opportunities for trading mortgage-based securities (MBSs). This stimulates a secondary cycle in which more investors take part and increase the inter-bank credit exposure. This tendency, com-bined with the emerging strategy in the financial sector to disperse the risk through the economy, played a crucial role in the events to follow (Crouhy and Turnbull 2008; IMF 2005b).

Secondary Mortgage Market

The secondary mortgage market thrives on the trad-ing of CDOs and the insurance coverage for them in the form of credit default swaps (CDSs). Despite the first CDOs being sold in 1987 (Wikinvest), there is little mentioned about them in the global financial reports of the IMF or FSB until late 2003(IMF 2004; FSB 2003). It was believed that by structuring and diffusing the credit risk throughout the financial in-dustry, the stability of the sector would increase and shocks of the financial systems would be absorbed without significant impact (IMF 2006).

stood to lose. The market was plagued with no trust in the usual counterparties and the interbank lend-ing, on which banks relay to fund their operations, ceased for an extensive period of time (Wells 2002). The inevitable outcome was a liquidity crisis where governments and the Federal Reserve had to inject money to avoid further collapse of the global econ-omy. As there is currently no market for the mort-gage-backed securities, no one knows how much they are actually worth (Roome 2010).

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Figure 3: CDO Structure (IMF 2006)

Figure 4: Single-Name CDS Cash Flows (IMF 2006)

The interbank trading system and the various link-ages are essential for the survival of the industry (Wells 2002). However, as the subprime mortgages were sold around the world in different pools and with added CDSs for insurance or for profit, no one knew who had the biggest exposure when subprime mortgages started defaulting and how much they

Figure 5: Global Credit Derivatives Outstanding (IMF 2006)

Figure 6: Global Issuance of Collateralized Debt Obliga-tions: Cash Versus Synthetic (IMF 2006)

OTC Trading

While the toxic nature of some of the derivatives circulating in the financial market might be the con-tagious agent, the situation was exacerbated by the channels that integrate all institutions, introducing the risk of systemic failure. Structured investment vehicles (SVUs) spread the risk with no way of track-ing the exposure of organizations and the clustering of risk throughout the network. They are not traded on the regular exchange but over the counter in bilat-eral contracts between diverse counterparties. Most of them are not regulated and neither are the trans-actions they engage into, thus the system is often re-ferred to as the ‘shadow’ banking system (Farhi and Cintra 2009). Its importance increased in the period of 2000-2007 to a degree where it became crucial for the existence of the financial industry (Gross 2007).


Over-the-counter markets are little regulated and transaction costs are relatively low (Ferderer 2008). There is no clearinghouse to guarantee the volume and prices of transactions. Institutions like the Inter-national Swaps and Derivatives Association (ISDA) and the Financial Industry Regulatory Author-ity (FINRA) do provide legal guidelines for trading over the counter but there are no requirements for disclosure as contracts are considered private with high level of customization (Wikinvest).

Over-the-counter trading has grown significantly in the last century and technology is often pointed out as one of the main factors in its development (Beltz 1972). First the telegraph and then the electronic platforms (Dodd 2002) accounted for the exponen-tial growth in volume of transactions as well as the spread of specific financial instruments (Harding and Grove 1998; ISDA 2003a; IMF 2006). The auto-mation of the ISDA guidelines brought legal cer-tainty to the derivatives trading and it accounts to a degree for the popularity of the CDSs to manage risk (ISDA 2005). The use of the Financial Products Markup Language (FpML) helps increase efficiency and reduces operational risk. Over-the-counter mar-kets are not restricted to big savvy corporations but with focus on small and medium institutions, they allowed trading to grow at an unprecedented pace (Ferderer 2008). The 24-hour access, speed of trans-action and facilitated negotiation are only some of the advantages provided by the technology. Elec-tronic confirmations, cash flow matching and settle-ment efficiency have been considered as main areas for reducing operational risk(ISDA 2003b; ISDA 2003a). Over-the-counter trading platforms allowed for increased speed of trading and higher volumes of transactions as well as the opportunity to reach clients globally. The lack of regulation in over-the-counter trading has provoked a loss of control over the boundaries of the network, encouraging feed-back loops, which reinforce the already present vol-atility, spreading the uncertainty outside the circle of financial institutions.

The initiatives for stricter regulation of the OTC trading have been discussed in the years preceding the credit crunch but often rejected as too restric-tive for the growth of the market (ISDA Opera-tions Committee 2003a; FSA 2006). In a number of reports from the IMF and FSA it is mentioned that the risk management techniques are not yet mature enough to predict the outcome of great number of defaults of the underlying assets due to lack of comprehensive information about the transactions in this market. They do, however agree that in case of critical mass the consequences would be severe (IMF 1997). The main areas of concern in the OTC trading are stricter implementation of standards, a central clearinghouse as well as a central repository

where all transactions can be registered and the mar-ket stability monitored (FSA 2009a; IMF 2006). This can be achieved through automation processes and the utilization of inter-organizational information systems such as electronic trading platforms and electronic brokerage platforms. Existing regulatory systems, especially CESR in Europe, are amending their functionality to allow tracking and reporting of OTC transaction, which are currently outside of the transparency requirements (CESR 2009). As the financial industry has achieved a truly global status and the events in the period of 2007-2009 only prove this, a unified regulatory system would be required as a step towards protection from future systemic risk (The Trade News 2010).

DISCUSSION

The general agreement is that the financial instru-ments traded on the over the counter markets are particularly complicated and the evaluation of the interbank exposure in this sector is very difficult. Today most of the trading is done via electronic platforms giving boost to the exponential grow in the transaction volume (Weber 1993; Ferderer 2008). Searching for business counterparty, matching buy-ers and sellers, negotiating trading volumes and prices; these are only a few areas where technology has improved efficiency and reduced the transac-tion costs. It connects issuers, investors and bro-ker-dealers, providing real-time information with added value services on risk management. Allow-ing counterparties to communicate electronically has significantly increased the speed and the quality of exchanges, “supporting the globalization of the industry”(Toppen, Smits and Ribbers 1998).

When discussing risk inherent in the trading of over-the-counter derivatives, scholars and practitioners mostly refer to the risk on an individual transaction level. The advertised functionalities of electronic platforms are designed to minimize the negative impact of information asymmetry between trading partners but there is little effort to do so on an aggre-gate level. The impact of the development and diffu-sion of technology for OTC markets on the collective action has received little attention (Provan and Kenis 2007). The importance of this sector has become ap-parent with the increase of trading by 300% in just the last four years and the diversity of trading part-ners who participate in the OTC market, thus form-ing the shadow banking system where regulation and governance are minimal.

Connectivity so far has been considered as a mecha-nism to guarantee stability. The possibility to dis-seminate financial products in the form of informa-tion through the systems helps to increase liquidity and provide robustness to the network (Haldane

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2009). Networks however are more than the sum of the actors (Provan and Kenis 2007). The emerging properties of a system with limited diversification can also have an adverse impact. The inter-bank ex-posure creates a complex system of interconnected nodes where the scale of connectivity, the intensity and frequency of each link and the long tail of com-plexity contributes to increased systemic risk for the financial industry (Haldane 2009; May, Levin and Sugihara 2008).

With the increased influence of the shadow bank-ing system, network governance has become crucial. The coordination of networks is mostly an informal process where social relations play an important role compared to the more bureaucratic nature of hierarchies and market arbitrages. Inter-organiza-tional information systems are mostly credited for the formation of networks, but with trust sharing central stage as governance mechanism with pow-er and opportunism, automation is bringing a new dimension to the possibilities for coordination (van Alstyne 1997). Economic models have failed to pro-vide an early detection system in exceptional times; thus systems thinking can offer an integrated frame-work for analyzing the network and not only the in-dividual transactions.

The reductionist and unilateral contingencies ap-proaches used so far, have failed to reveal the big picture. . Switching from traditional analysis to sys-tems thinking and using the concepts of boundar-ies, residual category, emergence, communication and control might be helpful to analyze the situa-tion from different perspectives (Aronson 1999). As networks and systems do share significant similari-ties especially when it comes to interdependencies of the elements, we are adopting systems thinking approach towards the financial stability of the econ-omy built on numerous inter-organizational infor-mation systems and based on the idea that the whole is more than the sum of the individual parts (Provan and Kenis 2007).

When thinking in systemic terms people start by de-fining the boundaries of the network. This is when we leave certain components outside of the realm of investigation, making the same mistake as anyone using the traditional reductionist approach to analy-sis. Boundaries need to be redefined based on what we learn during the previous iteration. The financial system provides a fine example of how excluded ele-ments can be a reason for an oversight. The institu-tions forming this industry are not only the officially regulated organizations, but all participants in the trading of financial products. The impact of the de-rivatives market on the financial stability is exam-ined in the global stability reports but the role of the shadow banking system is often excluded from the

analysis.

Defining the boundaries always creates a residual category outside of the discussion. The feedback between the environment and the observed system should not be ignored. Financial markets are often examined in isolation and the impact of external fac-tors or the impact of the system on the outside world is not considered. This is how when evaluating the mortgage sector and the OTC markets the connec-tion between them was not properly established. This facilitated the contamination of the system and led to frozen inter-bank lending system and numer-ous organizations filing for bankruptcy.

There are certain features of a network that can be observed only when all the elements are connected and not just by examining the individual links or nodes. What is often considered as positive exter-nality actually exhibits elements of turbulence re-lated to a tipping point. This is how the subprime mortgages spread the risk from the blooming but relatively limited sector of real estate to all players in the global economy. The definition that the whole is more than the sum of the parts can be observed, where the reselling and redistribution of risk was initially thought to be beneficial for the financial sys-tems stability but it turned fatal as no one was able to evaluate the system as whole.

Technology plays a key role in forming the systems, but it can also serve another purpose – coordination. The IOIS are already used for the flow of financial information and electronic linkages exist in the form of automated underwriting and over-the-counter trading platforms; it is a matter of utilizing these data flows to provide network governance. Using suitable mechanism in a combination with timely processes at the crucial hubs of the network can help control the network and predict potential disrup-tions in the economy. It can provide information of the system as whole and its exposure to possible credit defaulting.

In summary, IOIS drive the possibility for OTC par-ticipants “to move from passive risk to active risk management”(Westerfeld & Zimmermann, 2008). However, to reach the full potential of credit risk management, the abovementioned maturity needs to be achieved. This can be done with the help of IS and by establishing electronic market regulations for credit risk trading.

Conclusion

This study has found that the use of systems think-ing gives scholars and practitioners better tools for analyzing problems. While adjusting the boundaries of the network, we consider the feedback loops be-

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tween the environment and the sub-systems main-taining the global financial stability. We also look at certain events that provoked the housing boom that could have been detected and counter-acted in a timely manner. By focusing on the interconnected-ness between the elements in the financial systems and with the appropriate data controls in place it is possible to detected the signs of the extreme ex-posure of banks and other institutions to the risk of failure of the housing market. The relevance of a new approach, one that stimulates holistic thinking, is clearly supported by the current findings, unilat-eral analysis will not help detect the potential issues that emerge from the links between various organi-zations.

The current findings add to a growing body of litera-ture on IOIS and further enhance our understand-ing of highly interconnected environment. This can refocus the attention of scholars to evaluate IOIS as core of the governance for the network economy. However, the intricacy of applying systems thinking has to be considered as it requires the processing of vast amounts of information and testing numerous possible scenarios. Furthermore, the current investi-gation is limited by the fact that we are studying an event retrospectively and some conclusions might unintentionally be influenced by post-mortem anal-ysis. Finally, as the phenomenon is very controver-sial, it limits the methods of research to secondary resources as not are willing to discuss the events that led to the demise of so many financial giants.

Lastly, despite the limitations of systems thinking, its principles are extremely useful for the modern manager to understand that relying on linear logic is not enough in a world with the level of complex-ity we live in. Technology can be used to build sys-tems that not only facilitate the automation of tasks but also allow for their coordination and control. To explore this, further research is required to evaluate possible regulatory mechanisms based on IOIS for network governance.

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KEYWORDS

ITOO

Sri Lanka

Organizing Vision

Institutional

Dispersed Work

ABSTRACT

The Information Technology Offshore Outsourcing (ITOO) practice has de-veloped well over the last two decades. Thus far, it is a phenomenon which has bridged the developed and developing world through a global supply of information technology services and related business processes. At its core lies a dispersed work model due to which geographical, temporal and cultur-al differences comes to bear on both client and vendor organizations. Within this thesis, ITOO is viewed as a focal point of organization for offshore IT vendors operating in Sri Lanka. A comparative case study is utilized to draw out possible institutionalized vendor practices in this national context. The aim is to shed some light on its implications for the local industry, the ad-opted theoretical perspective and future research.

Corresponding Author Email Address: [email protected] (N. S. Nanayakkara)

IT Offshore OutsourcingAn Institutional Approach on Vendor Practices in Sri Lanka

Nadeesha S. NanayakkaraMSc Analysis, Design and Management of Information SystemsInformation Systems and Innovation GroupDepartment of ManagementLondon School of Economics and Political Science

IT Offshore Outsourcing: As we know it todayThe practice of offshoring organizational business/IT processes to cost efficient locations outside national borders, has resulted in a US $60 billion industry to date and is expected to grow by 20% in the coming five years. However, this research is entirely focused on Information Technology Offshore Outsourcing (ITOO) which can be best defined as:

“The relocation of information technology related organizational activities to a wholly owned subsid-iary or an independent service provider in another country” (Based on Oshri, Kotlarsky and Willcocks 2009 definition of offshoirng)

In the early years when competitive pressure in-creased amongst Western firms, ITOO aimed at re-ducing operational and management costs of short term technical projects and improving response times. As such software development, quality assur-ance and product support were amongst the most favoured tasks to be offshored initially. (Eg: Chan-drasekaran 2004; Carmel and Agarwal 2002). How-ever, IT offshoring is no longer viewed as a trend but a given (Hirschheim 2009) and MNC’s with mature offshore models are increasingly distributing more complex, strategic IT tasks amongst global teams (Eg: Carmel and Agarwal 2001/2002; Kotlarsky and Oshri 2008; Levina and Vaast 2008) Currently, it is estimated that ITOO activities amount to more than 50% of global offshoring initiatives. North American companies, who have been offshoring back-office

technical work (application development, mainte-nance) to India since early 1990’s still accounts for 70% of offshore spending.

Meanwhile, supplier destinations are also revealing impressive figures, with India exporting approxi-mately US $40 billion worth of IT/BPO services in 2008 (Statistics from Oshri et al. 2009) In this respect, India, China and Malaysia have been ranked the top 3 offshore destinations in AT Kearney’s 2009 Global Services Location Index. In principle, ITOO thrives on a market based economy requiring a steady sup-ply of necessary skill and services that meet the growing demands of client destination. (Dutta and Roy 2005 ; Geffan and Carmel 2008; Aspray et al. 2006) This was not problematic as a highly skilled, English speaking labour force was readily available in these developing countries (Aspray et al. 2006; Kotlarsky and Oshri 2008) for a fraction of the labour costs in developed economies.

However, the potential benefits sought from this valuable commercial partnership between the East and the West has been thoroughly challenged in the recent past. To begin with, IT/BPO industries in the developing world undoubtedly felt the pinch of the recent economic downturn as significant cut backs were made on IT projects in general, affecting con-tractual value of offshored work. A.T. Kearney’s 2009 Report indicates that the number of offshoring deals signed worldwide between October 2008 and January 2009 dropped 38% compared to the same time period in the previous year. Additionally, pub-lic concerns that offshoring is rapidly influencing the decline of white collar work in domestic labour markets (Dutta and Roy 2005; Hirschheim 2009;

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Aspray et al. 2006), have got developed economies re-thinking their national/regional trade policies on this practice.

It has also been counter argued that the returns on Global Labour Arbitrage are diminishing as the rap-id diffusion of offshoring towards certain hotspots has resulted in an upward pressure on labour prices (Lewin and Peetres 2006). For example, it is shown that wages rise on average by 10-15% annually in Bangalore, India prompting projects to be shifted to cheaper areas such as Hyderabad and Chennai (Dutta and Roy 2005). Furthermore, client concerns regarding project management and regulatory is-sues have grown as a plethora of offshore projects failed to capitalize on proposed economies of scale but incurred many indirect/soft costs. For example, high levels of employee attrition require extra ef-forts to build new relationships and retain/manage knowledge held by key personnel. (Nicholson and Sahay 2004) Data security and intellectual property issues have been seen as inhibiting factors (Eg: Rott-man and Lacity 2006), especially due to some much publicized scandals that involved data theft by third party employees and it is believed that both USA and Europe would be looking to bring some of their offshore operations back onshore. Alternatively, nearshoring has may become more lucrative provid-ing these locations remain cost-competitive.

Thus, the most conclusive arguments that profess success for the offshoring model suggest greater flexibility and strategic intent when working in spe-cific offshore destinations with selected partners. It is claimed that mature suppliers are utilizing their wealth of experience in the industry on attempts to move up the client’s value chain (Lewin and Peeters 2006), whilst client are showing greater commitment to specific destinations which aligns itself with their broader business goals (Rottman and Lacity 2006).

In this context, Sri Lanka becomes a very interesting case as an emerging offshore destination attempt-ing to make its mark against its closest and stron-gest rival in the offshore industry; India. Sri Lanka is currently ranked 16th in AT Kearney’s Index, up 13 places from its position in 2007. The national IT/BPO industry currently generates US $250 million in revenue (national GDP estimated at US $42 billion for 2009) and is expected to reach US $1 Billion by 2012. It is considered one of the fastest growing ser-vice sectors in the country (23% last annum), with the potential to create approximately 70,000 direct jobs in 5-7 years (for a population of 20 Million).

Thus, wider institutional forces are striving to sup-port industry growth. The government declared year 2009/2010 “The year of English and IT” plac-ing heightened importance in developing requisite

skills followed by nationwide e-government educa-tional programmes.

Furthermore, tertiary educational institutes such as SLIIT and industry bodies such as SLASSCOM have been established in recent years, mirroring practices in India. However, India’s world renowned vendors (Eg: TCS, Wipro, Infosys) often prompts its small-er neighbour’s infantile industry to operate in the shadows. For instance, India’s 300 universities and 15,000 colleges produce almost 75,000 graduates in computing/electronics in a given year (Aspray, May-adas and Vardi 2006). In comparison Sri Lanka has 15 state run universities and by 2008 had only 12,500 software professionals. Despite these competitive pressures the island hosts a number of top ranked service providers catering to a global clientele. Large technical centers and R&D Units as well as small-er software development firms are operating in Sri Lanka, with the likes of Microsoft and Oracle also establishing offices in the country.

Having established the current position of the IT Offshore Outsourcing Practice and Sri Lanka’s rela-tive position as an emerging offshore destination it is important to highlight the main objective of this research. In essence, it aims for an interpretive micro level analysis of “What organizational arrangements reflect institutionalized ITOO vendor practices in Sri Lanka?” Undoubtedly, whilst the practice of ITOO has significant implications at the macro levels as discussed previously, the model’s sustainability both as viable business strategy and global service delivery mechanism relies heavily on the individual organisations, teams and professionals engaging in its activities.

More importantly, previous research reveal unique features such as dispersed work and multi-party col-laboration that define the very core of an ITOO ar-rangement between client and vendor organisations. Therefore, the following section reveals the institu-tional nature of ITOO and the extent to which it has been explored thus far in IS Research.

Institutional Arrangements in IT Offshore Outsourcing : The Contemporary Stance

Institutional theory has traditionally been used in the fields of Organisation Science, Politics and So-ciology. Yet, in recent times its principles have also been well utilized in Information Systems Research (Eg: Swanson and Ramillier 1997; Kshetri 2007). In effect, institutional theories analyze how social choices and actions are shaped, mediated and chan-neled in certain directions by institutional arrange-ments (Powell and DiMaggio 1991 in Currie 2004). Zucker (1977; 1987) explains the determinant of such an arrangement.

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They are

a) A rule like, social fact quality of an organized pattern of action

b) An embedding in formal structure

However, as the primary focus of this thesis is on offshore IT suppliers operating in a chosen destina-tion the arguments in this section will discuss insti-tutional feature in relation to vendor perspectives / practices at large.

At its core, the ITOO practice is reliant on distributed work structures. This involves collaboration between multiple parties who are geographically, temporally and relationally distant in accomplishing interrelat-ed activities. (Levina and Vaast 2008; Vlaar et al. 2008) For instance, the creation of ‘Offshore Development Centres (ODC’s)’ across multiple regions, by third party vendors has been seen as a positive move. It is claimed that such units enable business continuity across geographies, makes good use of local culture/language in serving global clientele and frees the cli-ent from production/delivery/HR responsibilities in application development offshore (Chandrasekaran 2004; Rottman and Lacity 2006).For example, TCS’s Centers of Excellence (CoEs) are seen as extensions of the ODC. They specialize in given technology ar-eas/applications and share this expertise with their global counterparts. (Oshri, Kotlarsky and Willcocks 2007; Kotlarsky and Oshri 2008).

Some of the challenges pertinent to the offshor-ing model include disparities in coordination and control (Dibbern et al. 2008, Carmel and Agarwal 2001), knowledge transfer and creation of shared understanding between geographically and tempo-rally distant teams (Nicholson and Sahay 2004; Cha, Pingry and Thatcher 2008). In this regard, effective multi party collaboration is seen as a critical suc-cess factor in offshore projects (Levina and Vaast, 2008; Rai, Maruping and Venkatesh 2009; Nicholson and Sahay 2004). Differences in professional status quo and resource availability between teams; and blurred ‘organisational boundaries’ could easily cre-ate a culture of isolation emerging over time.

It has also been pointed out that the key to success-ful, innovative collaboration amongst these distrib-uted teams lie in sharing and utilizing tacit and spe-cialized knowledge dispersed in various locales. (Eg: Levina and Vaast 2008) For the vendor, this is im-perative as it ensures business continuity and project deliverables are achieved in a timely fashion. How-ever, numerous challenges exist in this respect too. Assumptions regarding ownership of knowledge and product/process often creates barrier in devel-oping shared understandings. For example, tradi-

tionally it was believed that the client holds the busi-ness expertise whilst the vendor holds the technical expertise (Rai et al. 2008). However, in some cases it is claimed that the client from a high technology na-tion may have more relevant technical expertise than the vendor, relating to their given industry despite offshoring the work for cost considerations. (Dib-bern et al. 2008).

Furthermore, knowledge asymmetries seemingly heighten where onshore teams often comprise of ex-perienced and competent staff that constantly inter-act with the client, whilst the offshore teams provide training grounds for novices (Vlaar et al. 2008). In order to overcome the challenges mentioned above standardization of management processes, docu-mentation, technical platforms and other related physical artifacts has been encouraged as a start-ing point. However, national/cultural differences between employees that create variety in work eth-ics, communication patterns, social norms/values are seen as an additional challenge for managing relationships between these distributed teams. (Eg: Levina and Vaast 2008; Vlaar et al 2008; Rai et al. 2009; Kshetri 2007; Dibbern et al. 2008). Both client and vendor teams are required to invest in build-ing long term partnerships that support maturating knowledge requirements during growth phases as the number and complexity of tasks offshored in-crease.

Also, improved synchronous communication and lateral, informal interactions are considered the most suitable mechanisms to leverage diversity for innovation and create shared identity (Vlaar et al. 2008; Hinds and Mortensen 2005).

Past scholarly work on IT Offshore Outsourcing has explored the institutional features discussed above in varying degrees. Generally there has been consid-erable focus both on the macro (national, industry) and micro (vendor/client organization, project team) levels. For example, Dutta and Roy (2005) discusses client and offshore destinations (countries) whilst Oshri et al. (2007)’s work is based on a single vendor firm. Studies have also been conducted on, enablers of offshore project success (Eg: Carmel and Agarwal 2002), economic and organisational forces leading to offshore arrangements (Eg: Lewin and Peeters 2006) and assessment of vendor capabilities (Eg: Feeny, Lacity and Willcocks 2005).

Incidentally, there has been some concrete work carried out on the institutional forces that affect the offshore industry at a macro-level. The basic assumption being that industry practices are sup-ported/inhibited by various social institutions such as clients, service providers, government, academic and research partners, legal bodies to name but a

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few. Kshetri (2007) and Dutta and Roy (2005)’s stud-ies are two such examples. On studies carried out at the firm level basic principles/assumptions of in-stitutional theory are frequently incorporated. For example, Levina and Vaast (2008) research utilizes Practice Theory which put simply reveal how socio-structural properties are molded and institutional-ized by social agents. Their work discusses how dis-persed organisational groups actively shape mutual practices in creating multi party collaboration, but does not for instance consider how they are rein-forced.

Yet relatively little importance has been placed on initial institutionalization processes which occur at intra-firm level, with regards to the ITOO practice. This may be due to the fact that past research often considered institutionalization as a process which occurred in the latter stages of an innovation, when it had dispersed well beyond firms and their tradi-tional boundaries (Ramillier and Swanson 1997). Given the relative absence of research which utilizes a strong institutional perspective in defining prima-ry adoptive processes and rationalization of the IT Offshore practice at inter and intra -organizational level; this paper aims to create some inroads using a multi-case approach in the context of Sri Lankan ITOO Vendor Organizations.

In order to achieve this, it is also necessary to intro-duce the notion of an “Organizing Vision” (Ramil-lier and Swanson 1997; 2003) rooted in Institutional theorizing.

An Organizing Vision : Offshore IT Service Provision

The notion of an organizing vision was initially in-troduced by Ramillier and Swanson (1997:460) who defined it as “a focal community idea for the appli-cation of information technology in organizations”.

Undoubtedly on a casual glance the author’s refer-ence to client-server computing, computer support-ed collaborative work (CSCW), utility computing as well as e-commerce and data warehousing (Ramil-lier and Swanson 2003) as organizing visions shows conformance with the stoic definition. However, there has also been some mention of related mana-gerial practice such as BPR and outsourcing, which may not indicate the necessity for information tech-nology so explicitly as in the previous examples.

Thus, it is important to expand on the initial defi-nition, to include assumptions of an organizing vi-sion to identify what may and may not constitute one. Ramillier and Swanson (2003) point out that an organizing vision whilst promoting the adoption and diffusion of an IS innovations are inherently

complex, dynamic and shows ‘discursive construc-tion’ (temporal development). Hence, they claim it is not merely technical in nature but rhetorical and demands ‘critical reception’ from those actors who shape it.

Currie (2004) has explicitly described Application Service Provision (ASP) as an organizing vision in her study and proposed the vision serves a process oriented analysis of an IS innovation from early adoption to latter diffusion. Indeed it provides solid affirmation that certain modes of outsourcing hold contemporary ‘innovative’ value as an organizing vision. ASP (sometimes linked to utility computing) has often been extended to reflect more recent mod-els of ‘Netsourcing’ (Willcocks et al. 2006)

Given that the organizing vision emphasised on IS innovation it is deemed appropriate to discuss it briefly, and how it might be incorporated in to this research. In IS Research there has been much debate surrounding IS innovations. These include arguments which support planned innovation (For example, through BPR processes) and those that fa-vour innovation via improvisation and ‘briccolage’ (Cibbora 1991).

Socio-technical approaches might consider IS in-novations as interventions in the organisation. Yet, it seems the common feature amongst these argu-ments is an emphasis on IS related organisational change/restructuring that emphasise invention, adoption and diffusion. With regards to the IT Off-shore Outsourcing model, one might argue that its ‘innovative’ nature has long being replaced by pro-cedural maturity given that the practice has spanned over nearly two decades in countries such as USA. Interestingly, the same might not be said for certain vendor/supplier in offshore destinations adopting this service delivery model only recently.

For example, from the first step of moving to serve global clientele, to the creation of unique technical platforms, development of vendor specific process methodologies and nurturing technical/business managers to play boundary-spanning roles reflect IS innovation at a fundamental level. Thus, for the pur-pose of this research; ‘Offshore IT service provision’ was deemed a suitable organizing vision for vendor organisations operating in Sri Lanka who appropri-ate new technical and managerial competencies with the primary focus of offering overseas clients a range of technology related products and services.

Both Ramillier and Swanson (1997; 2003) and Cur-rie (2004) reflect on three key arrangements that aid an organizing vision build a career over time. These helps establish the vision in the IS field in a manner that reinforces why and how organisations decide

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to utilise IT innovations in their structures and pro-cesses.

Interpretation

Scott (1995) argues that people notice, categorise and interpret stimuli from the environment in dif-ferent ways due to varied cognitive frames they uti-lise in the process of interpretation. Thus, in terms of an emerging organizing vision it is imperative that vagueness and doubt is addressed through con-structive interpretations which help make sense of the phenomena. In essence it seeks to build shared understanding and ground to initiate a worthy proj-ect (Ramillier and Swanson 1997).

Legitimisation

This concept is given much prominence in institu-tional arguments in organisational studies as it pro-vides cultural justification for the existence of a given organisation. It insulates against external pressures and provides explanatory and theoretical grounds to dispute alternative modes of organizing (Deephouse and Schuman 2008). Institutional Theorists identify a number of pressures that further the legitimisation process, with slight variations in terminology and purpose. Meyer and Rowan (1977) and Scott (2001) refer to Normative, Cognitive/Pragmatic and Regu-latory pressures in their work whilst Teo et al. (2001) refer to Mimetic and Coercive pressures too.

The assumption being that organisations embedded in institutional networks and performing transac-tions in a market based economy must attain a le-gitimate status to secure resources (Teo et al. 2001) and implement policies and practices that enable achievement of organisational goals (Meyer and Rowan 1977). The legitimate status of an organisa-tion or organizing vision is further evaluated by rep-utation of the authorities/social actors that engage in promulgating it. Professional endorsement has been considered a unique form of legitimisation by Deephouse and Schuman (2008). However, its im-portance is implied in Meyer (2007) argument that rules are created by powerful and interested actors who seek to control actions. Thus, legitimate orga-nizing visions are intended to support IS managers make more informed decisions (Ramillier and Swan-son 2003; Abrahamson and Fairchild 1999) issues of power and politics are most likely to affect final out-comes.

Organisation and Mobilization

This notion refers to actions taken by organisational actors to structure their own operational and mana-gerial processes for ‘material realization’ of the or-ganizing vision. These are also extended to reshape

entrepreneurial and market dynamics in further diffusing the IS innovation (Ramillier and Swan-son 1997), which supports the basic proposition of modern institutional theory that organisations are actively managing the field; responding strategically and innovatively to environmental pressures (Scott 1995).

Thus, for the purpose of this research the processes of interpretation, legitimisation, organisation and mobilization will be used as analytical tools. It is in-tended to help the author establish how vendors op-erating offshore in Sri Lanka attempt to accept and further the organizing vision of Offshore IT Service Provision, through their own cognitive processes, team and organizational practices.

Methodology

This thesis represents a qualitative study, drawing on some prominent assumptions of the interpretive studies. As described in Scott (2000) the basic prem-ise of interpretivism considers the construction of social reality as a subjective process. Furthermore, it is interesting to note how closely the notions of interpretivism conform with those of institutional theory.

For instance, Orlikowski and Barley (2001) highlight the importance placed by institutional theorists on cognitive and cultural explanations of organization-al behavior.

Indeed, previous work on this research topic has fo-cused on case studies of vendor/client organizations as it offers an in-depth understanding of the context of the phenomenon (Eg: Oshri et al. 2007). In some instances, a multiple case study methodology has been adopted by IS researchers such as Dibbern et al. (2008). This enabled them to build analytic gen-eralizations by using each case study as a template to compare/contrast empirical findings against a previously developed theoretical framework. Given these theoretical and methodological notion, three vendor firms operating in Sri Lanka, organizing Off-shore IT Service Provision were chosen as suitable institutions to be studied. However, the nation has a relatively infantile industry and most organizations show diversity in the scale and scope of projects un-dertaken. Therefore, it was deemed appropriate to select those that had established reputations with foreign clients over a period of ten years at mini-mum and were involved in software development and related business consultancy.

The primary field data was gathered via open ended (overt) questionnaires, with follow up interviews by phone where necessary. To acquire insightful data which highlighted managerial execution of offshore

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operations, the author explicitly requested for re-spondents who were senior managers handling proj-ects/client accounts.

Implications for the ‘Offshore IT Service Provision’ Vision

Upon analyzing the data acquired, organizations seemingly adopt IT Offshore Service Provision and institutionalize it on their own terms, rather than fol-lowing a pre-assumed path. For example, in Com-pany A the most significant of all insights was the client-centric nature of the its organizing vision, In effect, it seems to in still certain mimetic and coercive pressures for legitimacy as stated in Teo et al. (2003), Orlikowski and Barley (2001), and played a crucial role in shaping cultural/cognitive trends within the organization.

It also highlighted the importance of not acquiring an “us versus them” mind frame when maintaining healthy relationships with clients over long periods. As Gefan et al. (2008) proposed it further allowed the organization to become ‘preferred suppliers’ for giv-en clients during crisis situations (provided fall back options). However, it was interesting to note that the responding managers did not merely conform to cli-ent orientations. They considered client-vendor rela-tions in the light of a synergistic partnership as sug-gested by Rai et al. (2009) and took proactive steps to ensure on-time delivery of high quality products/services.

On the other hand, Company B’s Organizing Vision emerged as one based on specialization. Respon-dents replies suggested vast pool of (share-able) knowledge located in separate work groups. This reflects well on Nicholson and Sahay (2004)’s argu-ment that the migration of knowledge in offshore (distributed) work should be accommodated by a negotiation process, enabling the mobilization of knowledge at different locations. Furthermore, as Zucker (1987) pointed out the implications of the degree of embeddedness for institutionalization processes was reflected in the company provision of specialized ‘consultancy’ training sessions (drawing on inherent expertise) for local staff sent overseas.

Lastly, Company C was seemingly striving for a cost efficiency in adopting the ITOO vision. As a relative-ly small firm operating in a niche market (mobile, HR application development, HR outsourcing) it had chosen a SaaS (Software as a Service) model and attempted to cut operational costs by streamlining co-ordination and control mechanisms.

Overall, in establishing analytic generalizations whilst organizational learning seems to have ac-quired institutional legitimacy, socio-political forces

and support from the wider IS community emerged as significant institutional influences on the whole.

One source of legitimization and subsequent mobi-lization of resources seemingly emerges via expe-riential learning. Teo et al.(2003) argues that at any given point organizations possess a combination of knowledge/skills that reflect their current operations and managerial processes. Indeed this was reflected in multiple responses across all three cases.

For example,

“The exposure I have had to a wide range of tech-nologies and the complete SDLC means that I un-derstand the realties faced by the project teams. The project management and client negotiation skills continue to be a part of the skills set I need…..” (Re-spondent MA1 - 6.5 years as Head of Technical Pre-sales on a Application Development Team)

“Dealing with demanding customers (during pre-sales customer demos, was)…….. required to be creative in providing solutions ….need to be out of the box” (Respondent MB2)

It also confirms, Zucker (1987)’s claims that orga-nizations operating in institutional environments seek personnel conforming to sector specifications. In fact, Rottman and Lacity (2006) state that CMMi certification is no substitute for experience, as clients often incur extra costs facilitating lengthy learning curves.

Thus, despite difficulties in applying this across the board (national pool of labour) it is indeed fair to claim that Senior Project Managers operating in or-ganizations as those depicted in this research, place heightened importance on experiential and organi-zational learning. A small reflection of this was also seen with regards to the questionnaire sent; when one responding manager stated on his email that it was good for retrospection. Thus the rapid emer-gence of organisational core capabilities in leader-ship skills, programme management and customer development shows much promise, for their impor-tance is realized and institutionalised at execution points.

Once again, many references to Sri Lanka’s potential as an offshore destination was made based on im-proved socio-political conditions. For example,

“Post-war stability attracting more foreign invest-ment and retaining skills within the country.” (Re-spondent MA2)

“It (industry) would have double digit annual growth thanks to improved security conditions in

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the country. More and more companies would find that IT resources in Sri Lanka are more dependable in terms of quality and turnover rate”. (Respondent MB1)

As Davis et al. (2006) pointed out, political instabil-ity often prompts clients to locate offices in multiple locations (to ensure business continuity) which in-variably reduces the revenue generated in a single location. Thus, we see a clear example of the impli-cations of wider institutional forces on this industry at a national level as discussed at the beginning, Ir-respective of the size or capabilities of the company, all 3 cases also sighted many instances of support received from both local and foreign partners in the wider IS community. For example, it was revealed that institutions such as Gartner and Forrester had shared business/technology trends whilst Oracle, Microsoft, Pega and CISCO had engaged in infra-structure development, joint venturing and techni-cal collaboration with some of these companies. As Ramillier and Swanson (1997) point out the wider IS community is indeed capable of bringing in a dis-tinct body of knowledge and standards which define the organizing vision’s ultimate practical value.

Thus, increasing community discourse on Sri Lan-ka’s ITOO capabilities at national and international levels becomes imperative, given global competitive pressures and the national industry’s infantile sta-tus.

Conclusion

Theoretical implications of this research focus on institutionalisation processes that begin at an or-ganizational level. More specifically it utilizes an institutional perspective which can be extended to in-depth studies on specific offshore sourcing mod-els in emerging destinations. Whilst many can ar-gue against the extent of institutionalisation within such a limited social network, there is no denying its presence. Thus, when reviewing mechanisms of ITOO legitimization researchers could look beyond obvious processes such as standards/certification. For instance, more focus could be given to strategic intent of various ITOO stakeholders and their ability to influence conformity in certain areas. Lastly, some thought must also be given to defining IS innovations (and organizing visions) outside traditional frames, which emphasis specific technologis. As the research clearly shows, in the IT service sector a combination of varied IT artefacts could facilitate competitive ad-vantages. This study also holds potential in several angles for future IS research that aims to study IS innovations/practices in the developing world. In particular, it provides a reference point for further academic research on the Sri Lankan IT/BPO indus-try in future, which is literally non-existent to date.

On a practical note, this study provides two valuable messages to IS practitioners – particularly senior managers engaged in ITOO operations in Sri Lanka. First and foremost, it reveals the necessity to prepare organizations for continuous learning. As Ben (2007) revealed, pervious project experience serves as an organizational memory and becomes an important point of reference for future plans. Thus, as depicted in Oshri et al. (2007) study of TCS, India reposito-ries of knowledge, that can be easily accessed by em-ployees should be meticulously developed within the firm

Secondly, whilst client-vendor relations are of sig-nificant importance, attention must also be given towards development of productive intra-firm rela-tionships. For instance, in Vlaar et al., (2008)’s study the quality of the interaction was deemed the most critical success factor for offshore/onshore collabora-tion.

Particularly, third party vendors looking to gain more business in the post-war period, need to have solid mechanism that ensure co-ordination and con-trol between their employees situated in multiple lo-cations and yet service common clients. As Dibbern et al., (2008) suggested team building initiatives that focus on creating shared identity and cooperative practices should be further developed.

However, there are also a number of methodological and theoretical limitations in this research. TO begin with, it is a relatively small purposeful sample. The author had to limit the scope due to time/resource constraints as well as a reluctance by most vendor organizations to disclose information on client-related offshore project practices. Levina and Ross (2003) in Vlaar et al., (2008) acknowledges this, stat-ing that non disclosure agreements signed with cli-ents may be one major reason reflecting the lack of vendor-related studies. Thus, generalizations could only be made on ‘replicating logic’ as and when they emerged during the interpretive analysis. On that note, despite attempts to be as objective as possible; the qualitative nature of the study invariably reflects subjective interpretations of the researcher as well.

Lastly, a more comprehensive use of the ‘organizing vision’ which included institutional influences de-scribed in Diagram1, would have proved more con-structive for analytical purposes. However, such an approach would have invariably required a variety of institutional data sources such as trade associa-tions, government, educational and media. Thus, it would have been best approached via a longitudinal research methodology which could have established temporal dimensions too.

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