1 Introduction

Nowadays, Virtual teams are leading to the popularity of software development projects as a result of globalization and advancement in communication technology. The need for organizations to coordinate work across geographical, functional, intra- and inter-organizational as well as temporal due to the rapidly changing business environment, the marketplace is becoming more globalized, inter-organizational alliances are becoming more and more popular, and organizations are designing more adaptable and versatile organizational structures. (Zuofa and Ochieng 2021; Mawamba and Malik 2022; Kirkman and Stoverink 2021; Setyanitami et al. 2023). COVID-19 and the culture of working from home have further added to the importance of virtual teams (Gifford 2022).

Economic, social, and political barriers are eliminated, and the world is getting flatter and providing a common development platform for growth. In the 1970s, organizations started implementing project management methodologies to handle the expanding demand for software across all sectors. Project managers are selected explicitly from team-based projects based on their expertise, experience and ability to contribute to the result and lead groups of individuals. Organizations can create new ways of creating and managing teams due to the advancement in information technology and communication.

Information Technology (IT) companies from developed economies find it costly to keep a large team of developers on site when they outsource software development project assignments overseas. Therefore, these organizations created virtual teams with some members geographically local and others connected over secured networks. Such teams have gained acceptance over the years. It is estimated that there may be up to 8.4 million employees in the USA alone who participate in one or more virtual teams or groups. (Abarca et al. 2021; Karl et al. 2022; Caputo et al. 2023).

Virtual software development teams are the focus of this study. Reviewing the different definitions that have been suggested for virtual teams is imperative. Managing a virtual team involves handling all communication strategies, project management techniques, and human and social processes in such a way that benefits the team. Companies use virtual teams for innovation, decision-making, and solving complex problems and tasks that heavily rely on information processing. (Curseu et al. 2008; Rehman et al. 2020; Mwamba & Malik 2022). Virtual teams are complex due to micro-level team dynamics and cross-cultural communication needs (Glikson and Erez 2020). In contrast to virtual groups, virtual teams have more interdependence and interaction between members. These teams are brought together to focus on a specific project with a specified end date, and sometimes they serve as temporary work arrangements. (Muszyńska 2022). These virtual teams are self-managed knowledge work teams from different areas of expertise established to complete a specific organisational task within a specific time frame. Virtual teams can be temporary or permanent and set up for a specific purpose, such as a strategic planning team. Global virtual teams are members with diverse cultural backgrounds spanning different geographical locations or nations (Handke et al. 2020; Ferreira et al. 2021). A crucial component of information processing in teams is the development of complex knowledge structures, which is facilitated by heterogeneity in team composition (Curseu et al. (2008); Kiely and associates 2022). From the definitions above, virtual teams are socio-technical systems comprising two or more individuals who communicate and collaborate to accomplish common goals. In contrast, at least one or more team members work in a different location, company, or time zone; therefore, coordination and communication are mainly based on electronic communication media (Martins et al. 2004; Hertel et al. 2005; Morley et al. 2015).

The Standish Chaos Report (2020, 2021) and the 3Pillar Global Report (2021) stated that professionals are still very concerned about the software failure rate after decades of using project management concepts in software development. The advent of virtual teams adds another level of complexity to the development process. It is imperative for us to identify and understand the traits of virtual teams which contribute to software project success.

This research studies virtual teams in software project management in the Indian Software Industry. The Information Technology (IT) sector has drastically changed in the last few decades in India, a country moving towards demonetization and becoming part of three trillion economies (Business Today Report 2023). According to The National Association of Software and Service Companies (NASSCOM), India is a major worldwide destination for software development projects. According to the NASSCOM Tech Start-Up Report, 2022, the Indian technology industry growth was 15.5% in 2022 with $227Bn revenue. If we try to understand this in the Indian context, India’s total IT services exports have reached USD 177 Billion in 2021, projected to reach $245 Billion in 2023. These confirm that India's information technology (IT) and information technology-enabled services (ITeS) sectors contribute significantly to the nation’s Gross Domestic Product (GDP) and employment generation (NASSCOM 2022). Software development outsourcing is a major portion of this sector. Development work is outsourced from developed countries such as the United States, the United Kingdom, and the rest of Europe to India. However, a review of research literature on the subject suggests that limited empirical research has tried to examine and understand how virtual teams work in the Indian context and how it impacts software project success (Lu 2015; Fossum et al. 2020; Presbitero 2021; Setyanitami et al. 2023).

This study highlights the low rate of software project success and studies the important factors in the virtual team scenario. Most software development projects are deploying global virtual teams, so the study is important. The challenges faced in managing teams must be focused on understanding the ingredients of successful software projects in Indian software firms. This will add to the basic parameters of the project’s success, i.e. time, budget and scope, thus adding to the existing body of knowledge.

The study identifies four virtual team dimensions and examines their impact on software project management success. These dimensions are Team Diversity, Team Dynamics, Technology Augmentation, and Strategic Decision Making. Working in a global virtual environment can create communication gaps, which groups address using information and communication technologies. Our study will help us understand the factors contributing to virtual teams' success in working on software projects. This understanding will help academics and corporate managers reduce the failure rate of software development projects.

2 Literature review

Project management principles and frameworks provide a systematic and scientific way of managing projects, which also applies to software development work. The literature review highlights the previous work done in software project management and the deployment of virtual teams in these projects.

2.1 Software development initiatives

Software project management has been a guiding framework for planning, controlling, and analyzing software projects since the 1960s. Despite the establishment of software project management principles, concerns persist over project failures, particularly in terms of budget and time overruns, as highlighted in the Standish Group Reports of 2020 and 2021. Project success in the realm of software development is commonly defined as the timely completion within the allocated budget and adherence to pre-determined functional specifications (Nokes 2007; Moran 2009; Tam et al. 2020). Given the persistent challenges and concerns surrounding software project success, it is imperative to delve into various factors influencing project outcomes (Nasir and Shabuddin 2011; Ibraigheeth and Fadzli 2019; Pereira et al. 2022; Zhang 2022).

The intricacies of software development lie in its dual nature, combining elements of both science and art. Unlike other engineering projects, software development is characterized by its inherent complexity and ad-hoc nature, where the final product is intangible. In response to these challenges, organizations have increasingly turned to agile software development frameworks, such as Scrum. Within the Scrum methodology, a product owner establishes a product backlog, and the entire project unfolds iteratively through sprints. Regardless of the chosen framework, the success of software projects often rests on the shoulders of teams, which may operate in a virtual capacity in many instances, adding an additional layer of complexity to project dynamics. Understanding these nuances is crucial for comprehending the unique challenges and opportunities that influence the success of software development projects (Avikal et al. 2022; Arora et al. 2023).

2.2 Virtual teams

Virtual teams represent sophisticated socio-technical systems, uniting two or more individuals who collaboratively work towards common objectives. It should be noted that these teams are characterized by the presence of a minimum of one member who is located in a different location, organization, or different time, which makes electronic forms of communication and coordination necessary. (Martins et al. 2004; Hertel et al. 2005; Setyanitami et al. 2023; Caputo et al. 2023). This paper has provided a comprehensive overview of various definitions of virtual teams in the introduction, establishing the groundwork for an in-depth exploration. The utilization of virtual teams has been a longstanding practice, accumulating substantial knowledge about effective management strategies, particularly in the realm of virtual meetings. Recent years have witnessed a heightened focus on enhancing collaborative work practices, often driving investments in new technologies. Concurrently, the distinctive nature and features of virtual teams present a host of challenges that significantly impact project success. This underscores the importance of comprehending the success factors inherent in global software projects that involve virtual teams (Iyamu and Adelakun 2021; Abdulmuhsin and Tarhini 2021).

2.3 The gap analysis and hypothesis formulation

The importance of digitization in various spheres of life has led to the expansion of the world's information technology (IT) industry. IT and ITeS (IT enabled Services) sector has also evolved profoundly over the last three decades in India. According to the NASSCOM report, this sector generated significant revenues locally within India and in exports (NASSCOM 2022). The IT industry is also one of the largest employers in the country. Given the sector's size, the study of virtual teams in software development projects is very important. Software development companies introduced project management techniques during the 1970s to manage the expanding software requirements across all sectors. Project managers lead teams of individuals who are specifically selected for a project based on their expertise, experience, and ability to contribute to the outcome. Global software projects are conducted in the current global environment, affecting business and the economy as a whole. (Korrapati and Rapaka 2009; Tsoy and Staples 2021).

Software development projects are people-focused, technologically advanced, and skill-driven in nature. Organizations can now create new ways to manage teamwork with the developments in communication and information technology. Nowadays, the modern software development process is not complete without virtual teams. Teams of workers with specialized knowledge who work remotely and need to coordinate via technology in order to complete critical organizational tasks are known as virtual teams. (Lipnack and Stamps 2000; Morrison-Smith and Ruiz 2020).

A number of studies have identified factors that influence enhanced performance of virtual teams. Most of the work done in this area has been tested for virtual teams working in the academic setup compared to those deployed for software projects. Table 1 identifies research from the literature that is relevant to this study. It is clear that most research has been done in developing countries, and very few studies examine virtual teams in the context of developing nations such as India. Most of the previous work is exploratory and qualitative, whereas the current study is causal and quantitative in nature (Abarca et al. 2021; Wu 2022). Our study on virtual teams in software project management addresses this gap in the research.

Table 1 Summarization of literature review
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From Table 1, it can be inferred that the less rate of software project success can be overcome by addressing the challenges posed by the virtual teams. Studies cover some aspects mentioned above, and very few comprehensive works have been done earlier. There are a few studies trying to portray an understanding of the combined factors; however, they are qualitative and literature review-based. Hence, this study fills the gap by combining the aspects mentioned above and testing it empirically.

Our literature review shows limited research on virtual teams in developing countries, specifically in the Indian context. We identified four dimensions of virtual teams that impact software project success.

A. Team Diversity: Demographic diversity is associated with the virtual team's formulation. On the one hand, virtual teams provide a way to bring together a pool of talent from across the world and on the other hand, project managers face challenges in handling the team working in different time zones and with different cultural backgrounds (Xue et al. 2005; Dewar 2006; Jimenez et al. 2017; Kozlowski et al. 2021). Diversity refers to the demographic diversity associated with the virtual team's formulation. Virtual teams provide a way to bring together a pool of talent from across the world, and on the other hand, project managers face challenges in handling the team working in different time zones and with different cultural backgrounds (Xue et al. 2005; Dewar 2006; Kozlowski et al. 2021). This diversity of talent and cultural backgrounds significantly affects software project success. Therefore, we define our diversity hypotheses as follows.

H1

There is a significant positive relationship between virtual team diversity and software project success.

B. Team dynamics—Limited face-to-face interaction among virtual team members may lead to a lack of trust and low interpersonal compatibility (Vaidyanathan et al. 2010; Gibbs et al. 2017; Schaubroeck and Yu 2017). According to Vaidyanathan et al. (2010) managing team dynamics is an important aspect of virtual teams. Since there is less face-to-face interaction, the project manager has a greater responsibility for understanding team dynamics and redirecting and resolving any conflict (Vaidyanathan et al. 2010; Gibbs et al. 2017; Schaubroeck and Yu 2017). Thus, if the managers manage the team dynamic well, it leads to a better success rate of the software project.

H2

There is a significant positive relationship between virtual team dynamics and software project success.

C. Technology Augmentation—The distributed team members work in a heterogeneous platform; thus, managing the change in technology along with ensuring sufficient security is crucial for the project's success (Vaidyanathan et al. 2010; Bradley et al. 2013; Abarca et al. 2021). The effort is required to scale technology and augment technology as needed since most of the work is done online in virtual teams (Vaidyanathan et al. 2010; Abarca et al. 2021). The project is a success when all tasks are successfully completed. Distribution of task, visibility and tracking of interdependent tasks, and restructuring of tasks if required is important in virtual teams. Therefore, we state our technology augmentation hypotheses as follows.

H3

There is a significant positive relationship between technology augmentation in virtual teams and software project success.

D. Strategic decision-making—There are multiple software project stakeholders and feedback from all of them must be considered when making any strategic decision. This becomes challenging with the widely distributed team (Prasad and Akhilesh 2002; Tannenbaum and Schimdt 2016; Chawla et al. 2018). A strategic decision is an important factor in the success of software projects. This includes a focus on aligning project objectives with the organization's larger mission. Risk analysis should also be taken into account while planning. With the widely distributed virtual team, this becomes challenging. Thus, better planning and communicating the larger vision to all team members results in a successful project (Prasad and Akhilesh 2002; Tannenbaum and Schmidt 2016; Chawla et al. 2018).

H4

There is a significant positive relationship between strategic decision-making in a virtual team and software project success.

Here, we have presented our research hypotheses, whereas, in the next section, we will elaborate on the research methodology used during our study.

It is evident that different variables and dimensions have been studied by previous research, and no study has considered the cumulative effect of virtual teams' dimensions on software project development. The challenges faced by the virtual teams deployed in the software project can be categorized into the four broad categories stated above. The previous literature highlights the software project success factors (Fig. 1).

Fig. 1
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Source: Author Creation

Proposed research model

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3 Research methodology

The current study is empirical in nature and proposes to test the impact of the four independent variables Team Diversity, Team Dynamics, Technology Augmentation and Strategic decision making on the software project success utilizing virtual teams.

The Fig. 2 describes in detail the process of data collection and analysis through the survey.

Fig. 2
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Source: Author Creation

Block diagram for survey

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3.1 Sample

The research aims to study the performance of virtual teams working on software projects for Indian IT companies, and hence, the entire country was the sample space considered for the study. India's NASSCOM report was used to identify cities within the country that were designated as IT hubs. A total of 35 companies were identified in the sample. The purposive Sampling method was used to select IT and ITES organizations in those hubs (Campbell et al. 2020). The use of NASSCOM's report and the identification of IT hubs ensure a diverse representation of regions, accounting for potential regional variations in team dynamics and project success factors.

3.2 Survey design and data collection

A questionnaire was designed based on the research model, which included twenty items that measured the independent and dependent variables in the study. The variables were measured using a Likert scale (Sullivan and Artino 2013). Demographic data was also captured in the questionnaire.

The survey instrument was distributed to 520 individuals identified within companies in India's IT hub cities. A total of 400 responses were returned, out of which 394 were usable. The Designation (or titles) of participants included Account Manager (AccM), Project Manager (PrM), Business Analyst (BA), Test Manager (TM), Team Lead (TL), Scientist, Senior Software Engineer (SSE) and Software Engineer (SE). Table 2 summarizes the percentage of respondents by Designation and shows that our respondents included individuals with different roles in virtual software development teams. The survey targeted 520 individuals within IT-hub cities, yielding a substantial response rate of 76.92%. The collection of 400 usable responses ensures statistical robustness and reliability in the analysis. The inclusion of participants with diverse roles, as indicated by Table 2, enriches the dataset, allowing for a multifaceted exploration of the virtual software development team landscape. The questionnaire captures demographic data, providing additional layers of context for the analysis. This information allows for the exploration of potential variations in responses based on participant roles, fostering a deeper understanding of how different roles within virtual teams may perceive and contribute to project success.

Table 2 Designation details of respondents
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Demographic Data analysis: Below Tables 2, 3 and Table 4 presents the demographic distribution.

Table 3 Duration of projects
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Table 4 Types of projects
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The tables above provide additional information about the sample, including the Designation of the respondents, project Durations considered (Table 3) and types of projects (Table 4). The diversity in terms of demographics ensures the randomness of collected responses. In summary, the demographic results show that the data were collected from various respondents, covering different projects with different project sizes and from different hierarchical levels of the software project team. The result also highlights that the maximum number of projects considered in the study are in the maintenance phase and of duration three months to ninety-six months.

3.3 Data analysis

The four independent variables are measured on a seven-point Likert scale ranging from strongly disagree to strongly agree to understand their impact on the project success.

4 Results

We used a multi-step process for data analysis. We first reviewed the means, standard deviations and reliability of the variables in the study. The values are provided in the table below. The Cronbach alpha values are all greater than 0.7, confirming the variable measures' reliability.

Table 5 indicates through standard deviation that the mean and variability of the data are good indicators of measurement. We then checked for multicollinearity. Table 6 shows the correlation matrix, which includes correlations between the variables in this study.

Table 5 Descriptive statistics
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Table 6 Correlation matrix
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The Table 6 indicates the high correlation, which may lead to a multicollinearity problem; hence, the data was cantered to remove this problem Iacobucci et al. (2016).

Table 7 indicates low correlation among the four independent variables after centring mean have very low correlation coefficients.

Table 7 Correlation after mean centring
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4.1 Multiple regression for independent variables

In order to test the proposed research model, regression analysis was applied to the four independent variables and one dependent variable.

The study focuses on the four important aspects in managing virtual teams deployed in software projects. The results of the regression analysis are provided in Table 8.

Table 8 Results of regression model without moderating effects
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The initial result shows that the four independent variables do have an impact on the project's success. The model is significant at a p value of 0.05 and shows that the adjusted R square is 0.728. The above table significance with p value = 0.000 (< 0.05) with F = 161.018.

Table 9 and Fig. 3 indicates that all the coefficients are significant with p value < 0.05, with Team diversity having the highest impact with standard beta coefficient = 0.230.

Table 9 Coefficient table
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Fig. 3
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Source: Author creation (Empirical result)

Empirically tested model

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The project’s duration adds to the challenges discussed above by Shenoy and Jha (2018).Thus, this parameter was also included in the regression analysis. For this, the categorical data duration was converted to a dummy variable by coding the duration less than 60 months as zero and more than that as one. (Grotenhuis and Thijs 2015). A two-stage regression model was run to include this, and the results are shown in Table 8.

Table 10 indicates that there is an improvement in the adjusted square value in the second stage model from 0.728 to 0.855; thus, the inclusion of duration as a dummy variable in regression analysis is justified.

Table 10 Results of a two-stage regression model
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Table 11 indicates that the proposed model is significant with p value < 0.05.

Table 11 ANOVA-two-stage regression model
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The result of the ANOVA table confirms the significance of the regression model, but it is also important to establish the significance of all the variables considered in the study. From Tables 10, 11, 12, it is evident that all four independent uses of social media with p < 0.05 are significant to understand the performance and success of the virtual teams deployed in the software projects.

Table 12 Coefficient table- two-stage regression model
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The results of our analysis show that the four dimensions of virtual teams significantly impact the project's success and the moderating role of social networking. A significant positive relationship exists among the four virtual team dimensions, Team Diversity, Team Dynamics, Technology Augmentation and Strategic Decision Making, on the software project success. The duration of the project also has a significant effect on the success of the software project.

5 Discussion & conclusion

Virtual teams have evolved into a pivotal component of contemporary software development projects, particularly with the prevalent trend of outsourcing. These teams present a unique opportunity to engage a highly skilled workforce dispersed across various geographical locations and time zones. While virtual teams offer notable advantages, they also bring forth challenges that significantly impact software project management. The success rate of software projects is a paramount concern for both academic researchers and industry practitioners alike. The outcomes of this study hold considerable significance in unravelling the intricacies of software project management, specifically in the context of deploying virtual teams.

In analyzing the study's results, the regression analysis underscores the significance of all four independent variables—Team Diversity, Team Dynamics, Technology Augmentation, and Strategic Decision Making—in ensuring the success of software projects. Notably, Team Diversity emerges as the most influential factor, with a pronounced impact, followed closely by Team Dynamics, where the influence is further shaped by the strategic decision-making process. Surprisingly, Technology Augmentation exhibits the least impact on software project success. This aligns seamlessly with the study's assertions, as the modest coefficient for technology augmentation suggests that contemporary software development projects proficiently handle the integration and expansion of new technologies, indicating minimal concern in the present digital era.

The study's findings emphasize the overarching importance of managing team-related considerations and effectively communicating the project vision to every team member. This strategic perspective significantly influences the success of software projects conducted through virtual teams. The lower impact of Technology Augmentation underscores the industry's adeptness in navigating technological advancements, while concurrently highlighting the critical role of cohesive team dynamics and strategic decision-making in ensuring project success in the virtual team paradigm within the dynamic landscape of software development.

5.1 Implications for managers

The findings of this study hold substantial implications for the Information Technology (IT) industry in India and other nations relying on virtual teams for software project management. Firstly, the study underscores the critical significance of effective team communication, collaboration, coordination, leadership, and trust in ensuring the success of virtual team management. Acknowledging these factors becomes imperative for organizations seeking optimal outcomes in software project execution. Additionally, the study highlights the pivotal roles of technological augmentation and strategic decision-making in achieving overall software project success.

Secondly, a crucial emphasis is placed on fostering effective team dynamics within virtual teams. Organizations are encouraged to proactively build trust, encourage open communication, and adeptly manage conflicts to cultivate a conducive team dynamic. Enhancing team dynamics can result in elevated collaboration, improved decision-making processes, and heightened levels of team satisfaction. This underscores the need for organizations to prioritize strategies that strengthen interpersonal relationships within virtual teams.

Furthermore, the study accentuates the importance of investing in new technologies to augment collaboration and coordination within virtual teams. Organizations are urged to explore and adopt innovative virtual work technologies that facilitate real-time communication, seamless document sharing, and efficient project management. Such investments can yield higher levels of team productivity, improved project outcomes, and bolster organizational competitiveness in the ever-evolving IT landscape.

Lastly, strategic decision-making within virtual teams emerges as a critical determinant of project success. Organizations are advised to actively seek opportunities for enhancing collaboration, knowledge sharing, and decision-making processes within their virtual teams. Effective decision-making, coupled with strategic guidance, can foster increased team engagement, heightened motivation and morale, and ultimately lead to superior project outcomes. In summation, this study furnishes valuable insights into the optimal utilization of virtual teams in software project management within the IT industry. Organizations can leverage these insights to refine their virtual team management practices, elevate team performance, and achieve superior project outcomes in a competitive global landscape.

5.2 Limitations

While our research contributes to the existing literature on virtual teams and software development project success, it suffers from a few limitations. First, the complexity of projects was not captured in this study. Secondly, our sample consisted of software development firms in India which received software projects outsourced by companies in developing countries. Our study was restricted to India, which is only one developing country.

5.3 Areas of future research

We now explore a few areas for future research. In our research, we identified dimensions of virtual teams and how they influenced software project success. The model we proposed and empirically tested in the study can be extended to the virtual teams deployed for other sectors like service and fast-moving consumer goods (FMCG). Secondly, our research focused on one developing country, India. The research findings can be further elaborated to study the behaviour in other developing countries to substantiate the research model. This can help us determine whether our findings are also generalizable to other countries.

In summary, there are a number of interesting questions that can be answered in future research.