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Globally Distributed Software Development - Fextrax

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Assignment #2

Globally Distributed Software Development (GDSD)

"Software engineering is witnessing a transition from the traditional co-located form of development to a form in which global software teams collaborate across national borders" (Damian, Zowghi. 2003)

We live in an age of outsourcing. Firms seem to be subcontracting an ever expanding set of activities, ranging from product design to assembly, from research and development to marketing, distribution and after-sales service. Some firms have gone so far as to become "virtual" manufacturers, owning designs for many products but making almost nothing themselves.

It means finding a partner with which a firm can establish a bilateral relationship and having the partner undertake relationship-specific investments so that it becomes able to produce goods or services that fit the firm's particular needs.1

This is the question that Fextrax must ask before they decide on GDSD or outsourcing: "What is the impact of stakeholders' geographical distribution on global software development?"2

How do remote communication and knowledge management, cultural diversity and time differences negatively/positively impact on the software development process?

Globally Distributed Software Development:

GDSD is the creation of software by geographically distributed stakeholders in multiple locations.

Some of the positive effects of GDSD are:

International perspectives and skills sets are utilised

Wider labour pool of highly skilled employees to choose from

Reduce costs by locating staff and developing global offices in low cost economies

Increase local knowledge of global markets (know what the customer wants)

Opportunity for increased employee distribution

Increased autonomy for employees whose managers are not co-located

From these positives we can deduct that GDSD can lead to improved performance, lower costs and improved workforce standards. However, not all the effects are positive and one must also consider the negative effects of GDSD

Research has found that the negative effects of GDSD are:

Lack of common understanding due to poor communication

Work is slowed down due the involvement of more people leading to bureaucracy

Reduced awareness of working local context and practices

Distributed teams do not under go the same forming-storming-norming performing process that co-located teams do

Lack of Trust

People at different sites are less likely to perceive themselves as part of the same team than are people at the same site

Ability to share work artefacts

In assessing the different effects that an implementation of GDSD would have on Fextrax it has been decided to perform a SWOT analysis to discover and outline the various internal and external factors that will affect any international development initiative that Fextrax may proceed with. This involves outlining the Strengths, Weaknesses, Opportunities and Threats.


Increased economies of scale including buying hardware in bulk

Reduction of long-term costs such as labour, supplies etc

Greater local knowledge bringing more customer closer to the company

Site specialisation in areas such as marketing and developing

Increased skill set of managers

Increased brand awareness


Language barrier with employees of target country

Initial set-up costs may be expensive such as groupware and site development

Slower software development time due to slower communications and different time zones

Increased logistics management between sites in different countries

Problems getting current staff to move from current site to oversee the setup of the new site

Counter productive ramifications on staff morale

Increased security risk for Fextrax on financial data due to increased transfer of sensitive data and information.


Opens up new market possibilities through new distribution channels

Increased competitive advantage through cost reduction

Increased size in customer base

Take advantages of national competencies within the country of relocation such as Japans corporate loyalty and German efficiency

Government tax incentives for relocation - corporate tax allowances

Grant possibilities for start up in certain areas of different countries

Reduced dependency on one market area. This reduces the risk if the economic or labour markets collapse.


National culture may become company culture

May lose focus on the current market (company spread too thin over several markets)

Competitor may already be in the projected market and may have established a strong foothold.

Barriers to entry may create difficulties within the selected market e.g. government regulations, corruption, infrastructure costs, licences and permits etc.

Expanding into new markets could result in trade union action from workers in the home market.

From this analysis we can clearly see that there are both positive and negative aspects of GDSD. For Fextrax to succeed in GDSD they should consider the following guidelines3:




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