Analysis of the Interplay between Organizational Capabilities, Complexity and Costs in System Development Projects

Global competition and rapid technological advancement have driven system development projects toward ever-increasing complexity, often resulting in cost overruns and schedule delays. While prior research has examined product, structural, and organizational complexity in isolation, little is known about how their interplay, alongside organizational capabilities, shapes project costs. This paper develops a unified framework that integrates functional, structural, and organizational complexity with both operational and dynamic organizational capabilities and investigates their combined impact on non-recurring engineering costs. A system dynamics model is set-up in VensimDSS capturing key feedback loops governing task iteration, capability evolution, and communication overhead. Scenario analyses reveal how high dynamic capabilities can mitigate the cost impact of complexity resulting in possible leverage points for project managers. The results of the study highlight nonlinear interactions: For example, incremental gains in communication productivity yield disproportionate cost savings under high functional complexity. These findings offer actionable guidance on aligning organizational capabilities to manage complexity costs, paving the way for further research into multidimensional complexity management.