The paper describes an on-going research project that uses agency theory and the concept of information asymmetry to explore possibilities in decreasing project escalation in outsourced information systems (IS) development projects. We analysed three IS development methods for this purpose. As results of the analysis we proposed a framework for studying the information asymmetries of IS development methods. The framework includes three features that are interrelated to each other, namely sharing agent behavior and outcome information and information sharing system. We used the framework to study standard contract terms for IS development in Finland (IT2000). Specifically, we wanted to see if the features of the proposed framework are visible in IT2000 contract. The results were promising in that aspect. Moreover, we found that IT2000 contract does not take well into account the more flexible agile IS development methods and can therefore lead into higher information asymmetries in IS development projects than would be typical for flexible development methods. Hence, we conclude that this area should be further investigated to understand how the framework could be used in IS development projects to decrease project escalation. This research will extend our understanding of the reasons behind project escalation in IS development projects.
Kataja, A and Tuunanen, Tuure, "Information systems development methods and reducing information asymmetry: a way to decrease project escalation in outsourcing?" (2006). ECIS 2006 Proceedings. 126.