iSChannel Volume 6, Issue 2 (special issue)

ISSN 2042-5686 (Online)

iS

CHANNEL Faculty Editor Dr. Will Venters Editor-In-Chief Attila Marton Special Thanks Prof. Chrisanthi Avgerou Lay-Out Design Shannon Spanhake

Volume 6

Issue 2 (Special Issue)

December 2011

Contents

From the Faculty Editor Will Venters

Editorial

Attila Marton

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

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Ten Red Balloons: Virtual Teams and Online Communities A Test of Media Synchronicity Theory David Randall

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Newspaper Business Model Innovation from the Perspective of Information Systems Utilizing Commercial Content and Mobile Devices Kyle Hoback

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Systems Thinking and Inter-Organizational Information Systems Lessons from the Financial Crisis Mariya Dimova

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IT Offshore Outsourcing

An Institutional Approach on Vendor Practices in Sri Lanka Nadeesha S. Nanayakkara

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iSCHANNEL is available in PDF at http://is.lse.ac.uk/ischannel you can also join us on facebook or follow us on twitter Contact Dr. Will Venters Information Systems and Innovation Group Department of Management London School of Economics and Political Science Houghton Street London WC2A 2AE Email: w.venters@lse.ac.uk

Sponsored by The Information Systems and Innovation Group Department of Management London School of Economics and Political Science

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CHANNEL EDITORIAL From the Faculty Editor This is our first special issue. When the iSCHANNEL began we were uncertain that we would be able to produce 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 editors – 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 Venters Faculty Editor

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iS CHANNEL EDITORIAL The iSCHANNEL is going through a stage of transition. Starting with the redesign of the logo and layout of the journal last year, we are now introducing our first special issue. Up until today, the iSCHANNEL appeared only once a year publishing papers written by students who were still in the middle of their studies at the Information Systems and Innovation Group. Not having the possibility to showcase 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 relationship between the implementation of new information 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 implemented. Hence, he delves into the domain of organizing 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 expectations may be addressed.

The second paper takes us into the world of virtual 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 internet-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 technology 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 competencies.

The role of information technology in the recent financial crisis is at the centre of the paper by Mariya Dimova. A very timely topic, she discusses the inadequacy of control mechanisms for the financial sector based on the notions of markets and hierarchies. She proposes a view based on the notion of networks as found in large-scale inter-organizational information systems. Adopting a system theoretical 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 Information 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, organizational or institutional life. In this spirit, we hope for an enjoyable and interesting reading.

Attila Marton Editor-In-Chief

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

MSc Analysis, Design and Management of Information Systems Information Systems and Innovation Group Department of Management London School of Economics and Political Science

KEYWORDS

ABSTRACT

ICT-Related Organizational Change ERP Implementation Cultural-Historical Activity Theory Organizing Visions

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 expectations and preparations for the arrival of technology amongst members of different organizational groups.

Introduction The relationship between Information and Communications Technology (ICT) and organizational change is a topic that has been drawing considerable 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, complex and unpredictable to say the least (Ciborra 2004).

The ongoing interest in phenomena that emerge as these technologies become ever more deeply embedded in social systems has been pursued by scholars and practitioners with the help of a plethora of theoretical lenses, models and methods that have been advanced to illuminate, explain and in some cases attempt to predict, the consequences of the increasing ‘digitalization’ of the organizational workplace.

The study presented in this paper focuses on the early stages of the unfolding experiences of an international organization as it prepares to harness a specific 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 – CulturalHistorical Activity Theory, henceforth AT – that is Corresponding Author Email Address: alexandre.koloskov@gmail.com (A. Koloskov)

not widely used in IS but affords coherence with established approaches within this multidisciplinary landscape. AT is used to explore the ways in which ERP software is implicated in the collective learning processes that occur as organizational members collaboratively engage in the dialectic development and articulation of a future form for their organization. The first section presents a concise discussion of relevant literature on technology-related organizational change and elaborates the scope of the study. AT is then introduced as a lens for studying artifact-mediated collaborative learning and is subsequently applied to analyze and interpret the findings. The final section summarizes the central argument, 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 Organizational Change Scholars from several fields, most notably organization studies, administrative science, strategic management and information systems have championed various techniques for understanding organizational change so as to manage or ‘control’ it. The central importance of rational analysis and managerial agency are hallmarks of such instrumental approaches. Advocates of managing change by means of planned interventions initiated and orchestrated by managers in response to perceived problems, opportuni-

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iS CHANNEL 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, logical, ‘hard and fast’ rules and practical methods that promise to deliver sustainable benefits from investments in ICTs (e.g. Hammer and Champy 1993; Kotter and Schlesinger 2008; Peppard and Ward 2005).

Peppard, Ward and Daniel’s (2007) ‘Benefits Dependency Network’ exemplifies a methodology that builds on the ideas of business process re-engineering (BPR) and involves a systematic top-down approach 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. Ultimately, the goal of the intervention is to replace the current working practices with the presumably superior reengineered process model.

The Limits of a Single Paradigm Rationalizing and standardizing entire existing activity systems so that they correspond to ‘best practice’ abstractions and can be represented as business processes in the digital language of the ERP software, 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’ processes, the inherent reductionist logic of such exercises 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 streamlined paths does not allow sufficient flexibility for situated adjustments, improvisation and bricolage – inevitable and uncontrollable features of the change-related learning processes that occur as employees 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 innovative 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 organization, 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) elements, 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 constructivist 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 situated action provide the basis for such a prominent constructivist stream that enquires into the contingent local practices of individual members of organizations 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 interplay between the interpretive, technological and institutional layers of a given change initiative (Orlikowski 2000).

Another constructivist approach, Actor Network Theory (ANT), is grounded in the belief that “technology is society made durable” (Latour 1991). It helps researchers to uncover the dynamic and unpredictable socio-political processes of negotiation, translation, representation and dissidence that define and shape both the process and the real outcomes of technology-related organizational change in practice. Though it is not explicitly associated with ANT, Swanson and Ramiller’s (1997) notion of organizing 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 historicallyevolving discourse amongst an interorganizational community of journalists, academics, practitioners

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

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

By focusing on the ‘moulding power’ of local contexts or vested interests constructivist accounts obscure important facets of the relationship between ICT and organizational change. They tend to overestimate the general malleability of ICTs and underestimate 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 frameworks 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.

From an AT perspective, organized collective human activity is seen as “a systemic formation that has a complex mediational structure” (Engeström 2008:26) and is always directed at an object – an external thing or motive that, to varying degrees, corresponds to the fulfillment of the needs of the particular 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 particular 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).

This paper draws on Cultural-Historical Activity Theory to address these gaps. It is argued here that the initial phase of deliberate managerial change initiatives, 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 collaborative knowledge creation. The consequences of these processes frame the further progress of the implementation of the ICT and the broader trajectory of organizational change, and thus warrant closer analysis.

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 idealizations of collectively, socially defined meanings.

Why not Constructivism?

Activity Systems, Object-Orientation and Mediated Learning Cultural Historical Activity Theory (henceforth AT) was developed for psychological studies of conscious 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 contexts (Engeström 2008). It is based on the conceptualization 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 goaloriented actions that constitute these activities and subconscious contingent operations which, in turn, constitute actions.

Learning and skill development can lead to the collapse 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.

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

All of the components of an activity system are interrelated, and in dynamic tension within themselves and with each other as the activity unfolds. Contradictions 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 interest in that they are both critical for understanding

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iS CHANNEL the causes of disturbances within the central activity system and constitute potential sources of innovation and change.

Object-related contradictions arise from the ongoing dialectic between personal and collective motives and the associated differences in mental representations of objects in a subject’s consciousness. For other components of an activity system contradictions emerge from differences between manifestations of the components in the physical world and subjective 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 interiorize their subjective perceptions and interpretations of the changed material nature of the object and the other components of the activity system that mediated their interaction with the physical world. The resulting “subjective properties are shaped by the subject’s idiosyncratic interpretation of the independent properties, connections, and relations of the objective world” (Wiredu 2005:95).

Individuals gain experience, refining these personal senses, by repeating a particular action under different conditions. Moreover, personal senses necessarily 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 accounts (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 activity system.

If an activity system is riddled with contradictions, how can it function coherently and effectively, delivering the outcome desired by its subjects? A certain degree of disturbances can be contained by the relatively stable mediating components of the system, guiding individual actions and maintaining a general state of stability that is required to accommodate a relatively smooth and coordinated flow of collective actions. However, level 2 contradictions that manifest themselves as persistent bottlenecks, inefficiencies and frequent breakdowns can substantially inhibit the achievement of collectively desired outcomes. Such contradictions invigorate the innovative potential of an activity system by motivating attempts to search for solutions and collectively develop 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 elaborated by alluding to the objectifying strategies of functional simplification and closure as critical constitutive elements of ICTs (Kallinikos 2004). The former refers to the reductionist nature of the way in which specific causal relationships are selected, represented and instrumentalized in order to achieve functional utility. These relationships are strong abstractions, or simplifications, of the contingent and heterogeneous nature of reality. These abstractions embody a cross-contextual, historic tangle of assumptions and ideals (ibid.). One of the main reasons for the invisibility of software is the persistent lack of adequate visualization tools, which can represent 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 encounter 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 particular ICT may seem on the surface that is perceptible to its users, its internal logic is very much protected from and thus recalcitrant to the specificities of real organizational contexts.

Finally, conformity is a prerequisite for and a consequence of embedding ICTs into real organizational contexts with particular imbrications of historic, technological and social constraints that the artifacts 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 particular 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 symbols 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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CHANNEL cultural-historical ideals remains largely hidden from the user’s view. Instead, the socially constructed 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). Individuals subsequently create personal senses of the affordances 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 stages 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 cooperation, knowledge transfer and advisory services to support the economic development efforts of developing countries around the world. The organization employs technical experts who design and deliver projects with the long-term goals of reducing poverty, improving the ability of local firms to engage in global trade and developing industrial infrastructure in an environmentally sustainable way. TCI has over 650 employees working at its European headquarters and over 2,800 experts and consultants on temporary assignments to its various projects in developing countries. Headquarter staff are organized into three principal functional divisions which are responsible for project management, research 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 contributions 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 articulated this vision, expressing the objectives of improved 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 reputation and relevance. OR was launched outright with the creation of a dedicated ‘change office’ comprised of two senior managers from within the organization as well as an experienced organizational change consultant who joined TCI full-time after having earlier conducted the feasibility study for this initiative. It also involved the formation of two parttime ‘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’ – incremental changes to streamline administrative procedures and reduce the reliance on paper to a minimum. Subsequently an extensive Business Process Re-engineering (BPR) exercise was carried out following the Benefits Dependency Network methodology (Peppard et al. 2007). Over 70 employees from across the organization thus participated in the reinvention 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, starting 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 departments in the organization and the process designs that they agreed on. Each workshop lasted a full working day, and involved a different group of participants. The researcher subsequently assisted the BPR team (consisting of the original OR team and 4 external consultants) in their analysis of the collected 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 documents related to the organization, and OR in particular. Quotations from interviewees, the OR change team as well as BPR workshop participants are used to illustrate the analysis.

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iS CHANNEL TCI as a Human Activity System – ‘Artisans versus Administrators’ It is important to note that the organization committed 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 organizational 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 transformation of the object of transferring technical knowledge, in the form of projects, into outcomes of economic development impact in recipient countries. The imperfections identified above can be conceptualized as disruptions to the smooth realization of the ‘scripted’ or planned delivery of projects that are symptomatic of systemic contradictions.

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 mediate the activity, particularly ICTs, and the object of service delivery. Obtaining complete, accurate and timely information about projects entailed a significant amount of manual work in TCI’s fragmented landscape of legacy ICT systems. Instead of providing an infrastructure that supports project delivery by enabling fast and convenient use and production of information, these tools actually imposed the additional burden of surveying disparate sets of data and manually compiling them into a coherent 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-

ning to delivery and closure. Moreover, incentives strongly favoured individual performance, “protection 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 approaches to accomplishing their work. Many became “jacks of all trades” engaged in “artisanal” crafting of projects, whose attention to the object of delivering high quality projects was diffused amongst a range of administrative, financial, and logistical concerns that punctuated the everyday delivery routine.

The degree of autonomy afforded to PMs necessitated the creation of a vast array of controls and rules so that their activities would conform with the relatively stringent financial rules and regulations imposed upon the organization by member states and the UN system. The consequence was a historically accumulated set of intricate and often redundant bureaucratic checks and balances. This made work at TCI ‘paper intensive,’ opaque and slow. An employee described the culture of the organization as being “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 components and the object are linked to a deeper issue, ingrained in the history of the organization. TCI’s culture 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 immediate 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 subjective 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. Senior managers were growing increasingly concerned at the consequences of this deep contradiction: deteriorating project quality and the widening of the ‘opportunity 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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CHANNEL 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 activity into the realization of the objectives in the mission statement.

Object-Oriented Interiorization of the Organizing Vision of ERP OR was explicitly shaped by its significant technological 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 immediate 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. Systematic 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 organizational 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 controlling effects, as an obligatory point of passage to “force people to change the way they work” and by rendering individual actions vulnerable to inspection 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 contradictory 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 motivational 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 minimum 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 prescriptions of starting from this object and then systematically “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 themselves 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 correctness of the process model that they were tasked with filling in and found it difficult to fit their experiences and knowledge into its linear constraints.

Discussions tended to deviate from the prescriptions of the methodology as participants inexorably reverted to analyses of the current situation, bringing 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, organizational 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 explicitly discussed during phases of modeling future processes and analyzing scenarios to evaluate their feasibility. These discussions revealed that the majority of participants only had a nebulous and inchoate 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 affordances 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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iS CHANNEL these personal senses and suggest that, for the purposes of most participants, the entire ICT landscape should perform like a heterogeneous whole, an enabling 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 unresolved and buried under the surface of the re-engineered process model that should form the basis for the selection and implementation of a concrete software product. It is likely that this subtle contradiction would be the source of disturbances and in-

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

novations throughout the impending implementation 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 thereafter. The arguments presented in this paper emphasize the explicit and implicit mediating roles of a particular ICT before it has arrived in the organization. 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 organizing vision. These personal senses of technologies 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 collaborative processes produce a wealth of innovative ideas for developing the central activity system.

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CHANNEL Finally, investigating the influence of conflicting personal senses, and the contradictions that they may spill out into, on the full trajectory of an organizational renewal initiative and their development along the way provides an enticing avenue for further research. It is the author’s sincere belief that a wider acceptance of AT in Information Systems would provide a substantial addition to the “diversity 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 applicable for the study of ICT-related organizational change.

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Ciborra, C. (2004) Encountering information systems as a phenomenon. In Avgerou, C., Ciborra, C. and Land, F. (Eds.) The Social Study of Information and Communication Technology: Innovation, Actors, and Contexts (pp. 17-37). Oxford: Oxford University Press.

Engeström, Y. (2008) From Teams to Knots: Activity-Theoretical Studies of Collaboration and Learning at Work. New York: Cambridge University Press.

Hammer, M. and Champy, J. (1993) Reengineering the corporation.

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Kallinikos, J. (2004) Farewell to constructivism: technology and context-embedded action. In Avgerou, C., Ciborra, C. and Land, F. (Eds.) The Social Study of Information and Communication Technology: Innovation, Actors, and Contexts (pp. 140-161).

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Kallinikos, J. (2006) The Consequences of Information: Institutional Implications of Technological Change. Cheltenham: Edward Elgar.

Kietzmann, J. H. (2009). In Touch out in the Field: Coalescence and Interactive Innovation of Technology for Mobile Work. Department of Management. Information Systems and Innovation Group, London School of Economics and Political Science.

Klein, H. H. and Myers, M. D. (1999) A Set of Principles for Conducting and Evaluating Interpretive Field Studies in Information Systems. MIS Quarterly 23(1). pp. 67-93.

Latour, B. (1987) Science in Action: How to Follow Scientists and Engineers Through Society. Milton Keynes: Open University Press.

Latour, B. (1991) Technology is society made durable. In Law, J. (Ed.) A sociology of monsters: essays on power, technology, and domination (pp. 103-131). London: Routledge.

Leont’ev, A. N. (1978) Activity, consciousness, and personality.

Englewood Cliffs: Prentice-Hall.

Mathiassen, L. and Sørensen, C. (2008) Towards a theory of organizational information services. Journal of Information Technology 23(4). pp. 313-329.

Orlikowski, W. J. (2000) Using Technology and Constituting Structures: A Practice Lens for Studying Technology in Organizations. Organization Science 11(4). pp. 404-428.

Orlikowski, W. J. and Baroudi, J. J. (1991) Studying information technology in organizations: research approaches and assumptions. Information Systems Research 2(1). pp. 1-28.

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

Peppard, J., Ward, J. and Daniel, E. (2007) Managing the realization of business benefits from IT investments. MIS Quarterly 6(1). pp 1-11.

Robey, D. and Boudreau, M.-C. (1999) Accounting for the Contradictory Organizational Consequences of Information Technology: Theoretical Directions and Methodological Implications. Information Systems Research 10(2). pp. 167-185.

Schultze, U. (2000) A Confessional Account of an Ethnography about Knowledge Work. MIS Quarterly 24(1). pp. 3-41.

Swanson, E. B. and Ramiller, N. C. (1997) The organizing vision in information systems innovation. Organization Science 8(5). pp. 458-474.

Vygotsky, L. S. (1978) Mind in Society - The Development of Higher Psychological Processes. Massachusetts: Harvard University Press.

Wiredu, G. O. (2005) Mobile Computing in Work-Integrated Learning: Problems of Remotely-Distributed Activities and Technology Use. PhD Thesis, Department of Information Systems, London School of Economics. available at http://www. lse.ac.uk/collections/informationSystems/pdf/theses/wiredu. pdf.

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iS CHANNEL Ten Red Balloons: Virtual Teams and Online Communities A Test of Media Synchronicity Theory David Randall

MSc Analysis, Design and Management of Information Systems Information Systems and Innovation Group Department of Management London School of Economics and Political Science

KEYWORDS

ABSTRACT

Media Synchronicity Theory Virtual Teams Online Communities DARPA Network Challenge Information Systems

“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 efficient task performance amongst a virtual team. The results also find contradictory 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.

Introduction As we move further into the 21st century, organisations 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 supporting such virtual teams - and computer mediated communication (CMC) - is therefore becoming increasingly 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 asynchronous in nature (defined as technology which introduces delays between the sending of a communication and its being received (Markus 1994), Corresponding Author Email Address: david.p.randall@gmail.com (D. Randall)

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 discovered 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 relies not on the ‘richness’ of the media but rather the suitability of that media to the communication processes 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 between the success and failure of a project, but MST is lacking in empirical support - especially in the context 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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CHANNEL tual team comprised of members of an online community.

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 characteristics 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 geographically, temporally and culturally diverse (Bosch-Sijtsema 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 differences 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 experience 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 interaction, 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 experiences performing tasks (in this case repairing photocopiers), which not only increases the working knowledge of other team members, but also promotes team bonding through increased socio emotional 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. However, help may be at hand in the form of social networking 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 endeavour 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 media 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.

Figure 1: Levels of media richness. Source: Wikipedia

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 Hollingshead, 1993), but despite this research MRT has continued 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 perceived 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 abandoned 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 explain successful task performance by teams and the

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iS CHANNEL contractions found in studies of MRT. A detailed diagram 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 occurs when the synchronicity of a medium matches the synchronicity that a communication process requires. Media Synchronicity is defined as “the extent to which the capabilities of a communication medium enable individuals to achieve synchronicity”. 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 communication does not arise from the matching of the capabilities 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 communication processes, conveyance and convergence (Dennis and Valacich 1999), it is posited that by examining 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 revise a mental model of the situation” (Dennis et al.

2008:580) Individuals engaged in conveyance will undertake significant information processing activities and therefore will require time to adequately process the information and make sense of it. (Dennis et al. 2008) Convergence: Involves the gaining of a shared understanding 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 understanding, 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 uncertainty or equivocality those tasks might possess.

Without sufficient conveyance it is easy for individuals 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 processes with the correct levels of media synchronicity.

Convergence and conveyance communication processes 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 coordinated behaviour (Dennis, Fuller and Valacich 2008).

High synchronicity is also associated with faster message transmissions, quickly modifiable messages 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 individuals 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 receipt of complex messages, as they will require more time to assess and interpret than simple messages.

For convergence processes higher levels of synchronicity 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 existence of a shared understanding is important and will require media of higher synchronicity, as will the ability to understand other individual’s interpretations 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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CHANNEL (H1) Transmission Velocity: the speed at which a medium is capable of delivering a message to the intended recipient(s).

Increased transmission velocity leads to high synchronicity 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 simultaneously.

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 communicated Using more natural symbol sets, and sets appropriate to the message content, will improve synchronicity.

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

Rehearseability will reduce shared focus and therefore lower synchronicity.

(H5) Reprocessability: the ability of a medium to allow 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 beneficial (Dennis et al. 2008).

Research Methodology & Design Following an interpretive approach (Orlikowski and Baroudi 1991) this research investigates the validity 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 ‘Nerdfighters’, 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 members 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 Nerdfighters community. All participants were from an assortment of cultural, social and ethnic backgrounds from varying nationalities - although a majority 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 geographical dispersal to see the group as a reasonable example 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 network mobilization experiment to identify distributed 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 balloons 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 geocoordinates 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 Report (DARPA 2010).

Case Study In this case study the Nerdfighters team attempted to use their vast social network to garner information about the balloon locations. In the first instance the Vlogbrothers channel posted a video on December 3rd which asked for participants to assist in finding the balloon locations by tweeting, emailing 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 balloon locations using a variety of media.

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iS CHANNEL 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 interviews were conducted with the virtual team members 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 impact on this particular study.

Results Participants were observed using transcripts of their conversations and a series of semi-structured interviews. There was no face-to-face contact with any participants at any time during the project and research 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 default 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 during 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.

dispatch people to check and confirm balloon locations. 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 synchronous 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 whereabouts 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 determined 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 people 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.

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.

During the challenge, there were bouts of heavy message exchange involving multiple conversation streams being created in the same Skype chat simultaneously. Usually these conversations would each involve two or three team members discussing 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.

Voice calls were occasionally necessary, mostly to

Communication in the Skype chat was fairly con-

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CHANNEL stant in the 6 hours the balloons were up with messages being sent at an average rate of one every 10 seconds, increasing significantly when a viable balloon 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 serious 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 experience of keeping track of multiple conversations without difficulty. None of the team members indicated 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 members fairly easily, one member noting: “…emoticons are sometimes necessary to convey a specific emotion that is had [sic] to determine over the internet, like sarcasm.”

Although there was evidence of mixed use of emoticons, no user indicated their use had negative results.

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 understanding. This is especially true of the non-native English speakers who tended to regularly edit their messages 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 informal 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 editing messages to be highly beneficial to conversation flow overall.

Lastly participants were asked about how they used the chat logging abilities of Skype. Participants indicated they valued the ability to refer back to previous 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 conveyance requires low media synchronicity and convergence high media synchronicity. Evidence from the study supports these hypotheses.

Firstly, the team used media with low media synchronicity 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 balloon 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 synchronicity (Dennis and Valacich 1999). Overall the use of media with low synchronicity was highly successful 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 media of high synchronicity were used by the participants 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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iS CHANNEL purpose as well. However it was decided early on, due to most team members dislike of the application, that it wouldn’t be used due to the flaws in its design, which often made it behave in an asynchronous fashion. The team instead chose to use a Skype chat as an ‘operations centre’ where they would discuss information bought to them by various participants 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 media 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 showing that effective task performance was achieved following 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 synchronicity.

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 rapidly when the team was trying to gain a shared understanding 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 impact 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 parallelism, 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 increases media synchronicity.

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

(H5) - Rehearseability and reprocessability will negatively impact synchronicity by lowering shared focus.

The research does not support this prediction. Interviews showed that while participants tended to agree that rehearseability and reprocessability did reduce the rate of message transmission to a limited degree, this was greatly offset by the positive effects. Participants viewed the ability to edit messages and refer to older messages as very useful tools. Editing was valued highly, especially by foreign language speakers and those with disabilities, as it allowed participants to correct simple mistakes. These findings fit previous work by Walther (1996) who suggests that rehearseability allows for better structured statements. Thus, as the participants 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 findings directly oppose the predictions of the impact of media capability as stated in MST. The study indicated much support for MST especially 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 capabilities 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 community participants extensively use mediated communication 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 synchronicity.

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

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CHANNEL high synchronicity for convergence processes and media of low synchronicity for conveyance processes the team managed to effectively complete 8 out of the 10 tasks within a 10 ½ hour period. In successfully completing tasks using a variety of communication 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 performance of team, finishing 9th out of the 58 challengers in the competition, which is considered a favourable outcome overall.

Conclusion Implications for Future Research This study concentrates on only a single environment in which MST can be implemented. Future studies into MST need to investigate the theory in other environments to increase the amount of empirical 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 communities have on virtual teams, specifically what aspects of the online community improve the task performance 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 indeed 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 discounted. 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 information 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 research on MST, virtual teams, online communities

and the general body of information systems research. The study also answers the call for more research 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 results 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 necessarily 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 Limayem 2010), that this could be a result of the virtual 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 participants’ 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 evidence, concludes that it is a suitable theory for providing insight into how the media choice of teams can enhance their ability to carry out complex tasks.

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Lira, E. M., Ripoll, P., Peiro, J. M. and Orengo, V. (2006) How do different types of intragroup conflict affect group potency in virtual compared with face-to-face teams? A longitudinal study. Behaviour & Information Technology 27(2). pp. 107-114.

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Naik, N. and Kim, D. J. (2010) Virtual Team Success : Towards a Theory of Performance in Virtual Teams. 16th AMCIS. Lima, Peru.

Orlikowski, W. and Baroudi, J. (1991) Studying information technology in organizations: Research approaches and assumptions. Information Systems Research 2(1). pp. 1-28.

Orr, J. (1996) Talking about machines: An ethnography of a modern job. Ithaca, N.Y.: Cornell University Press.

Pickard, G., Rahwan, I., Pan, W., Cebrian, M., Crane, R., Madan, A. et al. (2010) Time Critical Social Mobilization: The DARPA Network Challenge Winning Strategy. Massachusetts Institute of Technology. Cambridge, Massachusetts.

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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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Newspaper Business Model Innovation from the Perspective of Information Systems Utilizing Commercial Content and Mobile Devices Kyle Hoback

MSc Analysis, Design and Management of Information Systems Information Systems and Innovation Group Department of Management London School of Economics and Political Science

KEYWORDS

ABSTRACT

Newspaper Business Innovation Commercial Content Mobile Devices Resource-Based View of the Firm

The newspaper industry is competing in an increasingly competitive market causing newspaper organizations to be innovative with their business models. This paper looks at newspapers from the perspective of Information Systems (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 banner 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 acknowledgement of the relationships with advertisers and the ability to extend beyond advertising into commercial content. Institutionalism helped describe the on-going discourse of the marketplace.

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 distribution, 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 “information 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 noncommercial entities because they “can obsess, they can focus”, whereas commercial groups like newspapers must keep things moving to keep things Corresponding Author Email Address: khoback@gmail.com (K. Hoback)

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 competition, newspapers are being forced to re-think their way of doing business, thus undergoing business model innovation. Their long-running model of selling a unique physical artefact featuring journalism subsidized by advertisements has not often transitioned well to electronic means, leading to newspaper decline (Yardley and Perez-Pena 2009) and demise (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 offering assistance (Schmidt 2009). “We need…journalism” (Shirky 2009a) and newspapers will continue attempts to deliver but must make changes.

The case study in this paper was created from indepth 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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iS CHANNEL 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 content, 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 information 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 businesses 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 paper to digital. Journalism remains the core, but to cover production costs, this paper argues that newspapers should subsidize with commercial content and mobile devices. This paper aims to provide the reader with a description of changes and improvements to the newspaper industry. Its goal is to describe issues and paths available for the transitioning newspaper industry. Thus, this paper attempts to answer the question: in a marketplace with increased competition, how can newspapers utilize an information systems perspective to innovate their business models?

This paper begins by reviewing literature on business model innovation, paid content, advertising, mobile devices, and relevant, inter-disciplinary academic 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 research.

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 context 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 company’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), production (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 improvisation, which may include the way the organization makes money, thus business model innovation. 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 customers led them to ignore,” e.g. Xerox copy centres and IBM mainframes (Bower and Christansen 1995:44).

Business model innovation is a difficult decisionmaking process of taking resources currently assigned to customer retention and re-allocating them to research and development (Bower and Christansen 1995), effectively taking short-term risks for long-term gain.

Researchers have tried with limited success of business model innovation to determine the best processes. 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 imaginative 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 repeatable 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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CHANNEL cannot connect the dots looking forward; you can only connect them looking backwards.” Govindarajan and Trimble (2005) discuss creating a completely new sub-organization that must balance useful pieces 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 innovation 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 associated with it. A significant portion of the business model is looking at what can be sold, which is investigated 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 professional levels of journalism. This section explores their many have attempted business model innovation.

One impending decision facing all newspapers is whether or not to institute a paywall. Despite concerns of attempting a paywall (Shirky 2009b; Carr 2009), some have been long-running (e.g. www.arkansasonline.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. Extensive 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 Rivard 2005). Theories to mitigate resistance, such as increasing perceived value (Kim and Kankanhalli 2009) could help, but the often-successful mechanism of heavy top-down communication (Pramatari et al. 2009) is less available outside of a formal organization, as in the case of newspapers. These complications 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 profits (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 disliked or unwanted, but it is often a desirable component 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 luxury 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 commercial content that is actively sought out by consumers rather than just distracting them. Mahadevan (2000:64) argues for the need of intermediaries to prove the accuracy of value of information, providing “revenue streams linked to exploiting information asymmetry”. Orgad (2008) references Maria Mandel of Ogilvy Interactive in saying that advertising, 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 handsets, as well as increase interactivity around a brand with ‘advergames’.

The mobile phone, along with keys and cash, comprise the three essential items regardless of gender or culture that most people carry with them (Chipchase et al. 2005). Mobile phones have the advantage of being a platform for applications that have high mobility, personalization, and large user demographics (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 information (Rashid et al. 2008).

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iS CHANNEL Moving from the PC into mobile devices provides newspapers a great opportunity, yet not without difficulties. While Laszlo (2009:28) predicts that mobile devices will become the “next great advertising medium”, 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 advantage (Amit and Schoemaker 1993). RBVF fits within strategy, organizational economics, and industrial organization research (Mahoney and Pandian 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 influence to sustained competitive advantage (Wade and Hulland 2004).

However, actively embedding IT in core capabilities can increase competitive advantage (Andreu and Ciborra 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 system of determining news, its importance, and how to arrange it in a usable product. This is further complicated 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 Andreu 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 successful, 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 institutionalist theory of organizations is that formal structures and processes are maintained not because of efficiency but because of power myths of shared as-

sumptions about their functionality and necessity (Avgerou 2002).

Swanson and Ramiller (1997) argue that an “interorganizational community, comprised of a heterogeneous network of parties with a variety of material 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 organizing 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”), implementation (bringing it about), and assimilation (diffusion 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 institutionalism research, including organizing vision, is relevant due to the large community of stakeholders. Of the many business model innovation possibilities, many – if not most or all – are debated in a combination of media.

Research Methodology For a deep perspective on the business model innovation of the newspaper industry, business managers 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 production 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 semistructured interviews instead of conducting a survey. Semi-structured interviews balance the rigidness of a structured interview with the flexibility to adjust the questions based on responses (Cornford and Smithson 1996).

This qualitative approach was not attempted without considering drawbacks, including longitudinal characteristics of the observations and the potential 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 nature 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 interviews were conducted under the assumption of anonymity and thus, presented anonymously, pro-

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CHANNEL 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 organization in the United States (US). Each interview was accompanied by an interview guide (see Appendix 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 individual quotes. Some interviewees were re-contacted to clarify or elaborate on key points.

Findings The group of newspaper business operations personnel all worked for the same media organization. This US employee-owned company controls the main newspaper of a metropolitan area with regional distribution – its flagship paper – as well as other smaller 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 almost 125 years, but like the rest of the media industry, 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 experiences 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 newspaper 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 advertising driving profit, that then drives the ability to deliver 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 muchrespected brand, one that is held dearly to the company. “You’re only as good as your name,” one manager 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 millions 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 provided, “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 vertical 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 leverage group buying – a minimum number of people required for the discount to take effect. This generally 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 considered first by looking at the organization via RBVF. This is followed by considering the organizing vision of commercial content and mobile devices.

The Individual Organization: Business Model Innovation The newspaper is actively attempting business model innovation. As one of the business managers stated, “The business model needs to change”.

This paper utilizes the RBVF to describe the regional newspaper’s long-successful print product in attempts 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 advertisers, along with many others associated with editorial, business, and operational tasks. The newspaper,

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iS CHANNEL for their flagship product alone, employs 179 people in the newsroom and 118 in advertising. Other resources include the hardware (e.g. printer, distribution trucks), software (e.g. content management system - 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.

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.

The next step combines these resources with organizational routines to form capabilities. The capability 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 representatives work on the capability to sell advertising 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. Combining these, the newspaper has created the capability to bundle all the content into a routinely distributed artefact.

This extended focus on advertising has led to longterm relationships with some advertisers. Even if the relationship with the individual business is not longterm with the newspaper, the reputation within the community is that it is the best way to place advertisements 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.

A core capability must be valuable, rare, imperfectly imitable with no strategically equivalent substitutes (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 accommodate advertising. The print product is capable of knowing the distribution postal codes of stacks of newspapers still in production. This allows local targeting by advertisers that may only be focused on a small part of a larger geographic area. In online advertisements, the first main concern (and buzzword)

The newspaper has continued to evolve its advertising offerings, now working on the buzzword of targeted 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 success 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 relationships. There are many alternative blogs by mothers and for mothers, but this blog can be a part of crosspromotional activities and other momentum from the overall bundle of information available from the newspaper. While advertising for mothers is assimilated 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 implementation.

Group buying is the new buzzword of the newspaper’s advertising. They saw an opportunity of companies 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 newspaper 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 opportunities 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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iS

CHANNEL ingSocial, but the newspaper is utilizing its advertising connections, brand name, and other advertising venues to complement and better facilitate this commercial content.

Opportunities: Mobile Devices The newspaper is beginning to utilize mobile devices as a key part of its digital delivery to its readers.

They recently released an Apple iPhone application and are considering more device-specific applications, e.g. Apple iPad (which they pre-ordered for development purposes), Research In Motion Blackberry, 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 capability 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 discussed previously, reading on a computer monitor is less preferred than print or a mobile device (Nielson 2010). However, screen size is an issue in both instances, especially the mobile phone, as neither matches the large (yet collapsible) size of the printed 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. Unless printed with additional hardware and materials, 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 newspaper piloted 2D barcodes, they first monitored places with some implementation, such as Europe.

Also, shortly after the test, a non-competitive newspaper in a similar market also ran a pilot. They communicated 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 Swanson 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 application. As the newspaper is in testing, it could be considered in the implementation phase, although after its release and similar to its paywall implementation, it will probably move back and forth around the phases before it reaches assimilation.

Conclusions The mobile device is a strong medium for newspapers to pursue. It lends itself towards the a key feature of the physical newspaper: the content is portable and accessible everywhere. While computers with internet access also have some portability and pervasive access, mobile devices, particularly mobile phones, are with people at all times. The newspaper 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 traditional printed newspaper: in addition to the journalism, the content that companies contribute – commercial content – can be useful for readers. Traditional banner advertisements are only a small part. Newspaper companies have a large portfolio of advertising connections, each of which can be utilized to provide 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 revenue sources are designed to make this information as accessible as possible. Time may prove that just selling the journalism is the best business model despite 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 professional journalism is expensive. Newspapers, with their large news rooms providing in-depth journalism 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 combat strong competition from non-commercial entities, often just individuals. With a focus on business model innovation, newspapers can position themselves to succeed.

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iS CHANNEL 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 explaining why paid content is not fully implemented and the newspaper in this study are looking elsewhere to innovate. In using RBVF, this paper hopes to have uncovered prescriptions – a focus on commercial 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 Ramiller’s (1997; 2004) organizing vision version of institutionalism 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 consider them long-term successes. Additionally, the business 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 organizations 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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iS CHANNEL Systems Thinking and Inter-Organizational Information Systems Lessons from the Financial Crisis Mariya Dimova

MSc Analysis, Design and Management of Information Systems Information Systems and Innovation Group Department of Management London School of Economics and Political Science

KEYWORDS

ABSTRACT

Systems Thinking Financial Markets Financial Crisis Inter-Organizational Information Systems

The role of inter-organizational information systems (IOIS) has evolved from being a competitive advantage into a necessity in the contemporary interconnected 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 interconnections 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.

Introduction Despite that OTC markets are relatively new, their rapid development is clearly expressed by the number 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 investment 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 socalled 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 several 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-organizational information systems but with no autoCorresponding Author Email Address: m.r.dimova@lse.ac.uk (Mariya Dimova)

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 networks 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 systems 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 environment (Suomi 1992) and with the advent of the Internet and the accelerated growth of on-line transactions; the impact of IOIS on economic and social matters cannot be ignored (Chatterjee and Ravichandran 2004).

Barrett and Konsynski defined the automation of inter-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 constant source of interest for researchers (Chwelos,

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CHANNEL Benbasat and Dexter 2001: Premkumar, Ramamurty and Nilikanta 1994; Iskandar, Kurokawa and Leblanc 2001), but in recent years another topic has caused a lot of interest. With the ability of technology 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, incomplete 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 separate 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 hierarchies to hybrid forms of structure based on relational exchange theory(Croteau and Bergeron 2009).

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

Inter-Organizational Information Systems as Control Mechanisms in Business Networks

Network Economy

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 interest 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 conceptualization 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 evolution and diffusion of information technology 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 nervous 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 duration of specific projects and then dissolved only to be re-utilized in another context (Castells 2001). Moreover, 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 “optimal exchange areas” (Concentric 2007).

The role of inter-organizational information systems has evolved with the existing business practices. Using 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 evaluated unilaterally using arbitrary aspects of inter-organizational 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. Attention is predominantly focused on the implementation, 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 governance, but they rarely form comprehensive models or frameworks to serve as guidelines to researchers and managers.

Networks have now been recognized as important 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

Numerous theoretical frameworks have been applied (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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iS CHANNEL failures(Mutch 1996). The aftereffect of the interconnectedness is not taken into consideration as a potential 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 literature 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 integrated 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 complex systems with distinctive externalities and issues. This research proposes an approach that takes a different outlook on inter-organizational information 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 understanding problems. It teaches us to look into objects 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 patterns of interaction between the elements from which problems materialize. The interactive processes are fundamental for the systems existence and understanding 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 behaviors can have a far-reaching effect (Espejo 1994)

and reaching stability of the systems via self-organizing and learning is the goal for the thinking manager . 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 variation of the boundary definitions. They should always be temporary to allow for adjustment according to the situation, and to make sure that relevant elements are not excluded. By setting the boundaries 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 complementary concept in system dynamics is the idea of delays. 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 management 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 information flow (Espejo 1994). An information sub-

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CHANNEL system is one that collects and distributes sufficient information about events in both the environment and the system, enabling a timely and effective response. Complementary to communication is control. 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 subsystems, 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 permanent control over a system that is continuously evolving and emerging.

Figure 1: US Yields (IMF 2005b)

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 interdependency 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 cascading failures that eventually engulfed all participants in the industry. Isolated events travelled along the information highway but the lack of proper regulatory mechanisms for network governance led to the instability of the system. This poses the question 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 returns 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 encouragement 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 analysis of the financial crisis, but they are crucial pieces of the puzzle as they created the necessary conditions for the events to follow.

Figure 2: US Home Mortgages and Financing Instruments (IMF 2005b)

Primary Mortgage Market The mortgage cycle starts with an individual applying for a mortgage. As the demand for high yield investment instruments created on the secondary market 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 mortgage, the investment firm re-posses the houses. The prices of properties had been growing for an extensive 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 underwriting is considered as the one most crucial IOIS in the field. The speed of evaluation, communication and negotiation of the final lending policy increased significantly. The efficiency of the origination process increased the flow of debt into the financial system

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iS CHANNEL thus creating opportunities for trading mortgagebased securities (MBSs). This stimulates a secondary cycle in which more investors take part and increase the inter-bank credit exposure. This tendency, combined 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

stood to lose. The market was plagued with no trust in the usual counterparties and the interbank lending, 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 economy. As there is currently no market for the mortgage-backed securities, no one knows how much they are actually worth (Roome 2010).

The secondary mortgage market thrives on the trading 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 industry, the stability of the sector would increase and shocks of the financial systems would be absorbed without significant impact (IMF 2006).

Figure 5: Global Credit Derivatives Outstanding (IMF 2006)

Figure 3: CDO Structure (IMF 2006)

Figure 6: Global Issuance of Collateralized Debt Obligations: Cash Versus Synthetic (IMF 2006)

OTC Trading

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

The interbank trading system and the various linkages 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

While the toxic nature of some of the derivatives circulating in the financial market might be the contagious 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 tracking 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 bilateral contracts between diverse counterparties. Most of them are not regulated and neither are the transactions they engage into, thus the system is often referred 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).

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CHANNEL 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 International Swaps and Derivatives Association (ISDA) and the Financial Industry Regulatory Authority (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 exponential growth in volume of transactions as well as the spread of specific financial instruments (Harding and Grove 1998; ISDA 2003a; IMF 2006). The automation of the ISDA guidelines brought legal certainty 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 markets 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 transaction and facilitated negotiation are only some of the advantages provided by the technology. Electronic confirmations, cash flow matching and settlement 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-thecounter trading has provoked a loss of control over the boundaries of the network, encouraging feedback loops, which reinforce the already present volatility, 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 restrictive for the growth of the market (ISDA Operations 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 market 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 instruments 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 buyers and sellers, negotiating trading volumes and prices; these are only a few areas where technology has improved efficiency and reduced the transaction costs. It connects issuers, investors and broker-dealers, providing real-time information with added value services on risk management. Allowing 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 overthe-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 aggregate level. The impact of the development and diffusion of technology for OTC markets on the collective action has received little attention (Provan and Kenis 2007). The importance of this sector has become apparent with the increase of trading by 300% in just the last four years and the diversity of trading partners who participate in the OTC market, thus forming the shadow banking system where regulation and governance are minimal.

Connectivity so far has been considered as a mechanism to guarantee stability. The possibility to disseminate financial products in the form of information through the systems helps to increase liquidity and provide robustness to the network (Haldane

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iS CHANNEL 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 exposure creates a complex system of interconnected nodes where the scale of connectivity, the intensity and frequency of each link and the long tail of complexity contributes to increased systemic risk for the financial industry (Haldane 2009; May, Levin and Sugihara 2008).

With the increased influence of the shadow banking 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-organizational information systems are mostly credited for the formation of networks, but with trust sharing central stage as governance mechanism with power and opportunism, automation is bringing a new dimension to the possibilities for coordination (van Alstyne 1997). Economic models have failed to provide an early detection system in exceptional times; thus systems thinking can offer an integrated framework for analyzing the network and not only the individual transactions.

The reductionist and unilateral contingencies approaches used so far, have failed to reveal the big picture. . Switching from traditional analysis to systems thinking and using the concepts of boundaries, residual category, emergence, communication and control might be helpful to analyze the situation from different perspectives (Aronson 1999). As networks and systems do share significant similarities especially when it comes to interdependencies of the elements, we are adopting systems thinking approach towards the financial stability of the economy built on numerous inter-organizational information 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 defining 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 analysis. Boundaries need to be redefined based on what we learn during the previous iteration. The financial system provides a fine example of how excluded elements can be a reason for an oversight. The institutions forming this industry are not only the officially regulated organizations, but all participants in the trading of financial products. The impact of the derivatives market on the financial stability is examined 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 factors 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 connection between them was not properly established.

This facilitated the contamination of the system and led to frozen inter-bank lending system and numerous 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 externality actually exhibits elements of turbulence related 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 systems 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 disruptions 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 participants “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 thinking 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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iS

CHANNEL tween the environment and the sub-systems maintaining 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 interconnectedness 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 exposure 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, unilateral analysis will not help detect the potential issues that emerge from the links between various organizations.

The current findings add to a growing body of literature on IOIS and further enhance our understanding 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 investigation is limited by the fact that we are studying an event retrospectively and some conclusions might unintentionally be influenced by post-mortem analysis. Finally, as the phenomenon is very controversial, 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 complexity we live in. Technology can be used to build systems 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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IT Offshore Outsourcing An Institutional Approach on Vendor Practices in Sri Lanka Nadeesha S. Nanayakkara

MSc Analysis, Design and Management of Information Systems Information Systems and Innovation Group Department of Management London School of Economics and Political Science

KEYWORDS

ABSTRACT

ITOO Sri Lanka Organizing Vision Institutional Dispersed Work

The Information Technology Offshore Outsourcing (ITOO) practice has developed 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 cultural 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 adopted theoretical perspective and future research.

IT Offshore Outsourcing: As we know it today The 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 subsidiary 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 increased amongst Western firms, ITOO aimed at reducing operational and management costs of short term technical projects and improving response times. As such software development, quality assurance and product support were amongst the most favoured tasks to be offshored initially. (Eg: Chandrasekaran 2004; Carmel and Agarwal 2002). However, 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 Corresponding Author Email Address: n.s.nanayakkara@lse.ac.uk (N. S. Nanayakkara)

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

Meanwhile, supplier destinations are also revealing impressive figures, with India exporting approximately 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 supply 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 contractual 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, public 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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iS CHANNEL 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 rapid 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 issues 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 efforts 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: Rottman 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 providing 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 specific 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 attempting to make its mark against its closest and strongest 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 service 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 support industry growth. The government declared year 2009/2010 “The year of English and IT” placing heightened importance in developing requisite

skills followed by nationwide e-government educational 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 smaller 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, Mayadas 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 smaller 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 relative 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 collaboration that define the very core of an ITOO arrangement between client and vendor organisations.

Therefore, the following section reveals the institutional 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 Sociology. 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 channeled in certain directions by institutional arrangements (Powell and DiMaggio 1991 in Currie 2004).

Zucker (1977; 1987) explains the determinant of such an arrangement.

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CHANNEL 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 destination the arguments in this section will discuss institutional 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 interrelated 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 client 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 areas/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 offshoring 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 temporally distant teams (Nicholson and Sahay 2004; Cha, Pingry and Thatcher 2008). In this regard, effective multi party collaboration is seen as a critical success 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 create a culture of isolation emerging over time.

It has also been pointed out that the key to successful, innovative collaboration amongst these distributed teams lie in sharing and utilizing tacit and specialized knowledge dispersed in various locales. (Eg: Levina and Vaast 2008) For the vendor, this is imperative as it ensures business continuity and project deliverables are achieved in a timely fashion. However, numerous challenges exist in this respect too.

Assumptions regarding ownership of knowledge and product/process often creates barrier in developing shared understandings. For example, tradi-

tionally it was believed that the client holds the business 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 nation may have more relevant technical expertise than the vendor, relating to their given industry despite offshoring the work for cost considerations. (Dibbern et al. 2008).

Furthermore, knowledge asymmetries seemingly heighten where onshore teams often comprise of experienced and competent staff that constantly interact 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, documentation, technical platforms and other related physical artifacts has been encouraged as a starting point. However, national/cultural differences between employees that create variety in work ethics, 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 building long term partnerships that support maturating knowledge requirements during growth phases as the number and complexity of tasks offshored increase.

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 considerable 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 supported/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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iS CHANNEL few. Kshetri (2007) and Dutta and Roy (2005)’s studies are two such examples. On studies carried out at the firm level basic principles/assumptions of institutional theory are frequently incorporated. For example, Levina and Vaast (2008) research utilizes Practice Theory which put simply reveal how sociostructural properties are molded and institutionalized by social agents. Their work discusses how dispersed organisational groups actively shape mutual practices in creating multi party collaboration, but does not for instance consider how they are reinforced.

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 traditional boundaries (Ramillier and Swanson 1997).

Given the relative absence of research which utilizes a strong institutional perspective in defining primary 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 introduce the notion of an “Organizing Vision” (Ramillier and Swanson 1997; 2003) rooted in Institutional theorizing.

An Organizing Vision : Offshore IT Service Provision The notion of an organizing vision was initially introduced by Ramillier and Swanson (1997:460) who defined it as “a focal community idea for the application of information technology in organizations”.

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

Thus, it is important to expand on the initial definition, to include assumptions of an organizing vision 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 construction’ (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 models 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 favour innovation via improvisation and ‘briccolage’ (Cibbora 1991).

Socio-technical approaches might consider IS innovations as interventions in the organisation. Yet, it seems the common feature amongst these arguments is an emphasis on IS related organisational change/restructuring that emphasise invention, adoption and diffusion. With regards to the IT Offshore Outsourcing model, one might argue that its ‘innovative’ nature has long being replaced by procedural 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 purpose of this research; ‘Offshore IT service provision’ was deemed a suitable organizing vision for vendor organisations operating in Sri Lanka who appropriate 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 Currie (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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CHANNEL to utilise IT innovations in their structures and processes.

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

Legitimisation This concept is given much prominence in institutional arguments in organisational studies as it provides 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 Regulatory 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 transactions in a market based economy must attain a legitimate 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 organisation or organizing vision is further evaluated by reputation 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 importance is implied in Meyer (2007) argument that rules are created by powerful and interested actors who seek to control actions. Thus, legitimate organizing visions are intended to support IS managers make more informed decisions (Ramillier and Swanson 2003; Abrahamson and Fairchild 1999) issues of power and politics are most likely to affect final outcomes.

entrepreneurial and market dynamics in further diffusing the IS innovation (Ramillier and Swanson 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 intended to help the author establish how vendors operating 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 premise 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 organizational behavior.

Organisation and Mobilization

Indeed, previous work on this research topic has focused 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 generalizations 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 Offshore 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 undertaken. Therefore, it was deemed appropriate to select those that had established reputations with foreign clients over a period of ten years at minimum and were involved in software development and related business consultancy.

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

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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iS CHANNEL operations, the author explicitly requested for respondents who were senior managers handling projects/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 following a pre-assumed path. For example, in Company 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 given clients during crisis situations (provided fall back options). However, it was interesting to note that the responding managers did not merely conform to client orientations. They considered client-vendor relations in the light of a synergistic partnership as suggested 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. Respondents replies suggested vast pool of (share-able) knowledge located in separate work groups. This reflects well on Nicholson and Sahay (2004)’s argument 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 relatively 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 acquired 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 mobilization of resources seemingly emerges via experiential 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 technologies and the complete SDLC means that I understand 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…..” (Respondent MA1 - 6.5 years as Head of Technical Presales on a Application Development Team) “Dealing with demanding customers (during presales 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 organizations 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 organizations as those depicted in this research, place heightened importance on experiential and organizational 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 emergence of organisational core capabilities in leadership skills, programme management and customer development shows much promise, for their importance is realized and institutionalised at execution points.

Once again, many references to Sri Lanka’s potential as an offshore destination was made based on improved socio-political conditions. For example, “Post-war stability attracting more foreign investment and retaining skills within the country.” (Respondent MA2) “It (industry) would have double digit annual growth thanks to improved security conditions in

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CHANNEL 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 instability often prompts clients to locate offices in multiple locations (to ensure business continuity) which invariably reduces the revenue generated in a single location. Thus, we see a clear example of the implications of wider institutional forces on this industry at a national level as discussed at the beginning, Irrespective 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 infrastructure development, joint venturing and technical collaboration with some of these companies. As Ramillier and Swanson (1997) point out the wider IS community is indeed capable of bringing in a distinct body of knowledge and standards which define the organizing vision’s ultimate practical value.

Thus, increasing community discourse on Sri Lanka’s ITOO capabilities at national and international levels becomes imperative, given global competitive pressures and the national industry’s infantile status.

Conclusion Theoretical implications of this research focus on institutionalisation processes that begin at an organizational level. More specifically it utilizes an institutional perspective which can be extended to in-depth studies on specific offshore sourcing models in emerging destinations. Whilst many can argue 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 advantages. 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 industry 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 repositories of knowledge, that can be easily accessed by employees should be meticulously developed within the firm Secondly, whilst client-vendor relations are of significant importance, attention must also be given towards development of productive intra-firm relationships. For instance, in Vlaar et al., (2008)’s study the quality of the interaction was deemed the most critical success factor for offshore/onshore collaboration.

Particularly, third party vendors looking to gain more business in the post-war period, need to have solid mechanism that ensure co-ordination and control between their employees situated in multiple locations 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 clientrelated offshore project practices. Levina and Ross (2003) in Vlaar et al., (2008) acknowledges this, stating that non disclosure agreements signed with clients 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 described in Diagram1, would have proved more constructive for analytical purposes. However, such an approach would have invariably required a variety of institutional data sources such as trade associations, 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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