The Effects of Customizability and Reusability on Perceived Process and Competitive Performance of Software Firms

This study addresses the broad research issue of how software firms can manage their software development efforts in order to compete effectively under intensified competition. Based on recent research in manufacturing strategy and software process engineering, a research model and six hypotheses were derived. Reusability and customizability were expected to positively affect process flexibility and predictability. In turn, these perceived process performance dimensions were expected to positively influence perceived competitive performance, assessed in terms of market responsiveness and product cost efficiency. Using a survey design, responses were obtained from a random sample of 100 software firms. Two kinds of respondents were used: the senior manager in charge of software development (58% response rate) and the marketing manager (36% response rate). The model and hypotheses were assessed using EQS, a structural equations modeling package that can be used for path analysis. The results from both the marketing manager and development manager responses suggested that process flexibility was an important determinant of perceived competitive performance. However, process predictability was an important determinant of perceived competitive performance in the development manager, but not the marketing manager, responses. Finally, while customizability had a significant positive effect on the perceived process performance dimensions, reusability did not. The research model is a potentially useful contribution to an important new area of MIS research concerning the performance of software firms, which draws from manufacturing strategy and software process engineering.