Let’s go back to June 2003. The GameCube had been out for a little more than a year. PlayStation 2 was just over the three year marker and the Dreamcast rounded out the bunch at almost four years old. That is also when we met the Original Xbox in all her glory with the original controller: The Duke. Now, if you’re a person with large hands, then you saw this massive thing as a blessing, but if you had normal or small hands, then this was just too much controller to hold.
Microsoft caught hell over this from gamers world wide and recently Seamus Blackley (co-creator of the original Xbox) has spoken out as to why this happened. According to Seamus, the “vendor…couldn’t make the electronics small” leaving them with no choice but to make the controller bigger to in-case the parts. They knew it was big, but justified it because “Dreamcast was our favorite console…so that made it feel less insane!”
So there you have it, plain and simple. The original Xbox controller was big, because they had no other choice.
Source: Gamespot