Toward Understanding the Capability Cycle of Software Process Improvement: A Case Study of a Software Service Company

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Abstract:

The emergence of a service economy facilitates proliferation of software service companies (SSCs), small firms offering various software services such as software maintenance, testing, and customization. Given the unique characteristics of SSCs (i.e.,
small-scale projects, limited resources, strong customer dependency, etc.), software process improvement (SPI) in SSCs faces
additional challenges. Based on Helfat and Peteraf’s framework of a dynamic capability lifecycle, this study aims to understand
how dynamic capabilities are developed to facilitate SPI implementation, and how these capabilities can be maintained and
transformed in a changing context. An in-depth interpretive case study was conducted in a SSC, namely SGSC, which is the an
offshore software service center of a leading U.S. document management company, Xerox Corporation. Drawing insights from the
framework, this study demonstrates the evolution of key resources and dynamic capabilities as well as their impacts on the
success of the SPI project.
Responding to the ownership transfer from Xerox to Fuji Xerox group in 2005, the center decided to implement new SPI process.
As shown in Figure 1, three capabilities (i.e., capability to strategize, capability to be flexible, and capability to integrate and engender trust) were built up during the first two phases (i.e., establishing direction and implementing SPI). Development of each capability
was accomplished through some actions with the support of various resources.
After development, capabilities can evolve over time (Zollo and Winter 2002). Two capabilities (capability to strategize and capability of integrate and engender trust) were maintained through regular exercise, which helps to refresh the company’s memory and facilitate the creation of embedded
knowledge. Besides being maintained, capabilities may also branch into different forms when external factors have a strong
impact to alter the current development trajectory. At SGSC, ownership transfer resulted in a dramatic change in terms of
external relationships and internal structure. With changes in the supporting resources, capabilities built up in previous
phases were further transformed into different branches. Capability to be flexible was renewed because of better communication and sharing resources with external partners. Capability to strategize was also renewed after obtaining a long-term view from the new parent company. Figure 2 summarizes the life cycle of three
capabilities in this study.
By integrating theoretical perspective with empirical evidence, this paper contributes to both researchers and practitioners.
For researchers, it constitutes one of the first empirical studies to extend Helfat and Peteraf’s general framework of the
capability life cycle by demonstrating how capabilities can be transformed through altered resources over time. Moreover,
this study advances the SPI literature by suggesting a conceptual framework for SPI implementation in a small-scale, service-oriented
company. Practically, this study provides invaluable suggestions to managers on how firms can successfully implement SPI strategy
when facing dramatic changes in the external environment or internal structure.