Cultural Characteristics and Their Connection to Increased Risk of Software Project Failure

Abstract

Offshoring software projects have been documented to increase the risk of project failure. In particular, the cultural differences between software client and provider countries are believed to increase the risk of project failure. We analyze a large data set of small software projects with providers and clients from various countries. For each provider and client country, and each combination of provider and client country, we calculate the project failure rate. We use Hofstede's culture dimensions power distance, individualism, masculinity and uncertainty avoidance together with Hall's communication style to measure cultural characteristics and differences. We found a statistically significant increase in failure rate with increased difference in the provider and client country's communication style, but no connection between cultural differences and project failure rate using Hofstede's cultural characteristics. Provider countries, and in particular, client countries with a low-context communication culture had lower proportions of project failures than countries with high-context cultures. A decrease in power distance and increase in individualism were both connected with a decrease in project failure rate. In total, the cultural differences between countries seem to matter less than cultural characteristics of the countries. In particular, some of the cultural characteristics of the client country were strongly connected with project failure rates. Software offshoring clients may benefit from an awareness of the importance of their role in avoiding project failures and consider adopting the cultural characteristics of the most successful client offshoring countries. They may also benefit from selecting software providers from low-context cultures.