@misc{9126,
  author = {Magne J{\o}rgensen},
  title = {A Strong Focus on Low Price When Selecting Software Providers Increases the Likelihood of Failure in Software Outsourcing Projects},
  abstract = {Context: Bidding rounds are frequently used to select competent and cost-efficient providers for software projects. Objective: We hypothesize that emphasizing low price when selecting software providers in such bidding rounds substantially increases the likelihood the project will fail. Method: The hypothesis is tested by analyzing a dataset of 4,791,067 bids for 785,326 small-scale projects registered at a web-based marketplace connecting software clients and providers. Results: We find evidence supporting our hypothesis. For example, selecting providers with bids 25\% lower than the average bid is connected to a 9\% increase in the frequency of project failures for the same level of provider skill. In addition, we found that clients emphasizing a low price, on average, selected providers with lower skill levels. This decrease in provider skill level further strengthened the negative effect of a strong focus on low price on project failures. For example, selecting a provider with a 15\% failure rate for previous projects instead of 5\% increased the failure rate by 33\%. Conclusion: We interpret the findings to suggest that a client may substantially reduce the likelihood of project failure by reducing the emphasis on low price when selecting a provider.},
  year = {2013},
  journal = {7th International Conference on Evaluation and Assessment in Software Engineering},
  pages = {220-227},
}