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Abstract:
Outsourcing of software development allows a business to focus on its core competency and take advantage of the vendor's technical expertise, economies of scale and scope, and ability to smoothen labor demand fluctuations across several clients. However, contracting a software project to an outside developer is often quite challenging because of the presence of information asymmetry and incentive divergence. A typical software development contract must deal with a variety of interrelated issues such as the quality of the developed system, the timeliness of delivery, the effort and cost associated with the project, and contract payment. This paper presents a contract theoretic model that incorporates these factors in order to analyze how to design software outsourcing contracts.
contract design, software engineering, software outsourcing
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