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DrBen
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Joined: February 8th, 2003, 1:24 pm

### Outsourcing Mania

Resently, there seems to be quite a mania with outsourcing IT. In January,some hedge fund manager contacted me and suggested I help run his off-shoreIT shop. This deal was basically a job... Now, I have some people who want toget me into a 6 month outsourcing contract; basically the rates are what I considerto be 'on the bread line'. How since I have no idea what the rates are (since I havenever really got into this business) and have no real idea as to what people expect,I really am at a bit of a loss as to what to do?Anyway, like all mania's I expect this one to blow up, there are so many peopledoing the get VC cash, outsouce everything except marketing' trade. Everythingis cost driven and people (i.e. management) seem to believe that software is acommodity.
Last edited by DrBen on March 10th, 2005, 11:00 pm, edited 1 time in total.

Cuchulainn
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### Outsourcing Mania

QuoteOriginally posted by: DrBenAnyway, like all mania's I expect this one to blow up, there are no many peopledoing the get VC cash, outsouce everything except marketing' trade. Everythingis cost driven and people (i.e. management) seem to believe that software is acommodity.DrBEnJust hold tight and wait until we see "I told you so".If you pay them peanuts you get monkeys. In general it will cost a lot of a money to make bad products.I do not believe in this hype. For DB type stuff it's maybe OK but not the cerebral stuff. I do not believe that Indians are necessarily good OO programmers. Not in the genes. I do however think that Swedes and Finns are good OO programmers from what I have seen.Knowledge is power and this includes s/w know how as I know you know. In general, management is not correct on this issue.> what people expect,> I really am at a bit of a loss at to what to do?Do what you want to do. People are being bamboozled. Remember the Internet hype? We are in the lemming phase as far as outsourcing is concerned. I compare it with one of the laws of Thermodynamics.
Last edited by Cuchulainn on March 10th, 2005, 11:00 pm, edited 1 time in total.
"Compatibility means deliberately repeating other people's mistakes."
David Wheeler

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DrBen
Topic Author
Posts: 500
Joined: February 8th, 2003, 1:24 pm

### Outsourcing Mania

QuoteOriginally posted by: CuchulainnDo what you want to do. People are being bamboozled. Remember the Internet hype? We are in the lemming phase as far as outsourcing is concerned. I compare it with one of the laws of Thermodynamics.I remember and I get that sort of feeling again. Then no one had any sensible metrics also some of the software backthen just don't work and people actually cashed in on investors ignorance. Remember WebGain, I was at somemeeting in 99' and they where introduced as some sort of messengers from God, after a few years they had burnt throughall the $100's millions of VC cash they got. Two years ago I did some work on one of there products and it just did notwork. Maybe, its worked when WebGain brought it for$50 million in 99', but by the time I saw it, it was completely busted.This period was definately a bad thing for software.Now we have the opposite. "This work is rather price sensitive blah blah blah.... I understand you need to eat blah blahblah....", you get the idea. Now there are again no metrics in the sense of quality, all I hear is "we are trying to gets costsout of the system". Again I think this is a rather unhealthy situation since talent is just going to leave the industry and gointo other areas.

Cuchulainn
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### Outsourcing Mania

QuoteOriginally posted by: DrBenQuoteOriginally posted by: CuchulainnDo what you want to do. People are being bamboozled. Remember the Internet hype? We are in the lemming phase as far as outsourcing is concerned. I compare it with one of the laws of Thermodynamics.Now we have the opposite. "This work is rather price sensitive blah blah blah.... I understand you need to eat blah blahblah....", you get the idea. Now there are again no metrics in the sense of quality, all I hear is "we are trying to gets costsout of the system". Again I think this is a rather unhealthy situation since talent is just going to leave the industry and gointo other areas.Dr Benyes bla. And to top it they say that the Indians at level CMM 4,5. So what? CMM says nothing about PRODUCT QUALITY it just says you can do projects in the same way each time. Instead of CMM Michelen badge I have DESIGN PATTERNS which I use each time ensuring product quality.The software industry in EU and USA is being undermined. People think that not only will you not have a good job in IT but no job at all. So people need to be trained again. Fine by me but we need a stable IT infrastructure.Personally, I am not afraid of anyone because I invest in keeping my knowledge up to date. That's the trick.Don't compete with them, don't compete at all. Do things that the low cost countries cannot do. Do a leapfrog.Quality will come back soon. This 1/2 year I have/will give about 6 C++ courses (in 5 different countries), something that has not happend in a while. Now I am lapping it up.The backlash will be twice as hard when it hits back. The crown jewels have been sold ...That's my 2 cents.
Last edited by Cuchulainn on March 10th, 2005, 11:00 pm, edited 1 time in total.
"Compatibility means deliberately repeating other people's mistakes."
David Wheeler

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linuxuser99
Posts: 835
Joined: March 26th, 2004, 2:51 pm

### Outsourcing Mania

>> yes bla. And to top it they say that the Indians at level CMM 4,5. So what? CMM says nothing about PRODUCT QUALITY it just says you can do projects in the same way each time. Instead of CMM Michelen badge I have DESIGN PATTERNS which I use each time ensuring product quality.But what if your CMM level 5 process is based on the use of Design Patterns? dont you get the benefit of both then?

Cuchulainn
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### Outsourcing Mania

QuoteOriginally posted by: linuxuser99>> yes bla. And to top it they say that the Indians at level CMM 4,5. So what? CMM says nothing about PRODUCT QUALITY it just says you can do projects in the same way each time. Instead of CMM Michelen badge I have DESIGN PATTERNS which I use each time ensuring product quality.But what if your CMM level 5 process is based on the use of Design Patterns? dont you get the benefit of both then?Linuzserver99Excellent! 200% That's my experience. Patterns are the templates for the process and they ensure product quality. IMHO if you know DP inside out and you know your domain, e.g. FE then Bingo (CMM 5) P.S. I have a feeling that the Indians are pretty cool in DP, just hearsay mind you
Last edited by Cuchulainn on March 10th, 2005, 11:00 pm, edited 1 time in total.
"Compatibility means deliberately repeating other people's mistakes."
David Wheeler

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LTrain
Posts: 1077
Joined: June 23rd, 2004, 6:42 pm

### Outsourcing Mania

SEI and 6sigma are scams IMO. Some time ago, I "volunteered" (boss speak for shut-up and just do it) to work on SEI and 6sigma. The whole game was about devising measurement techniques which made us look good, not improving quality.Favorite example: we counted lines of code and we counted errors released to the field. To reach 6sigma, we weighted each line of code by the probability that the line executes. Sounds reasonable until you think about it.. the null loop gets 98% of the weighting. Yup, we did a fine job writing the null loop in the OS!BTW we did achieve both 6sigma and SEI level 5.

LTrain
Posts: 1077
Joined: June 23rd, 2004, 6:42 pm

### Outsourcing Mania

Cuchulainn writes:> If you pay them peanuts you get monkeys. In general it will cost a lot of a money to make bad products.andDrBen writes: > Again I think this is a rather unhealthy situation since talent is just going to leave the industry and go into other areas. Perhaps we are simply watching a short term trend in response to dot-bomb, but the brain drain out of technology is real. I probably don't fit the description of "best and brightest," but I left my job as a principal engineer in a Fortune 50 tech company. I had patents, publications, new product launches, yada, yada, yada, and all that bologna. No regrets. Sadly, higher level skills are increasingly irrelevant and not rewarded. Even companies who live and die in tech - MS, Intel, Motorola, Qualcomm, etc - only want coders, QAs, and solder-monkeys. "what do you mean you want \$nnnK and can't even write ASP scripts""..but.. but.. I have 300 patents and taught Andrew Viterbi everything he knows"

Cuchulainn
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### Outsourcing Mania

QuoteOriginally posted by: LTrainSEI and 6sigma are scams IMO. Some time ago, I "volunteered" (boss speak for shut-up and just do it) to work on SEI and 6sigma. The whole game was about devising measurement techniques which made us look good, not improving quality.Favorite example: we counted lines of code and we counted errors released to the field. To reach 6sigma, we weighted each line of code by the probability that the line executes. Sounds reasonable until you think about it.. the null loop gets 98% of the weighting. Yup, we did a fine job writing the null loop in the OS!BTW we did achieve both 6sigma and SEI level 5.I agree 100% with you. CMM is usd to impress customers not for getting good products or keeping customer happy.Outsourcing is maybe short term.What I see (I trainer) is that the OO C++ developers of the 90's knew MUCH MORE than current generation. People know less and less. P.S. I now do numerical analysis, FE and C++, a good combination keeps skills levels up. Gives one a sense of purposes. No point being a hacker all my life (BTW I never was one, always refused).
Last edited by Cuchulainn on March 12th, 2005, 11:00 pm, edited 1 time in total.
"Compatibility means deliberately repeating other people's mistakes."
David Wheeler

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Cuchulainn
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### Outsourcing Mania

> The whole game was about devising measurement techniques which made us look good, not improving > quality.I 'intern' students from uni/high schools. They do C# projects. Their teachers indeed pay attention to GANTT charts, reports, in general facade evene though I am pissed off with their real work, i.e. running code.Some of these people do not even know what matrix multiplication is!! This is the new analfabetism.A sign of the times. We are living in the David Beckham tinselland, kind of make believe. It all started during Internet era. People have not yet woken up yet, even though the competition are sawing away the legs of your chairs.
Last edited by Cuchulainn on March 12th, 2005, 11:00 pm, edited 1 time in total.
"Compatibility means deliberately repeating other people's mistakes."
David Wheeler

http://www.datasimfinancial.com
http://www.datasim.nl

DrBen
Topic Author
Posts: 500
Joined: February 8th, 2003, 1:24 pm

### Outsourcing Mania

See above.
Last edited by DrBen on March 12th, 2005, 11:00 pm, edited 1 time in total.

DrBen
Topic Author
Posts: 500
Joined: February 8th, 2003, 1:24 pm

### Outsourcing Mania

> The whole game was about devising measurement techniques which made us look good, not> improving quality.That's always the point, moreover they miss the point that programming is a creativeactivity and by its very nature cannot be bottled. No one tries to provide metrics for Mozart'smusic, because they appreciate there is someone more than the quantifiable. I can understandthe business reasons and actually respect people who have a tight control on costs (a dollar savedis a dollar earned). However, I do not accept the notion that software is on the same level aspotatoe farming, that is, you just need to count the lines, or hours as a proxy for lines, and thenjust count the errors and so on.LTrain: You are exactly the type of guy I am worried about. Basically, for me its important to workin an industry where there are interesting people doing interesting stuff, and cutting away at thefabric is this way is damaging. > What I see (I trainer) is that the OO C++ developers of the 90's knew MUCH MORE than current> generation. People know less and less.I fear you are right on this, most people are risk averse and hence are looking for a career whichpays the rent/mortgage, car etc with a very high level of probability. Software risk/reward is gettingworse in developed countries and hence people are being pushed into other fields and quality overall is going down.

Cuchulainn
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### Outsourcing Mania

QuoteOriginally posted by: DrBen> LTrain: You are exactly the type of guy I am worried about. Basically, for me its important to workin an industry where there are interesting people doing interesting stuff, and cutting away at thefabric is this way is damaging. .This is a bit ambiguous for me to interpret. I understand where LTrain is coming from but you are saying?
"Compatibility means deliberately repeating other people's mistakes."
David Wheeler

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kc11415
Posts: 378
Joined: March 16th, 2003, 10:02 pm
Location: United States

### Outsourcing Mania

Outsourcing is talked about in the media as if it were a significant portion of the IT industry, while I've never seen anything to suggest that it provides anything other than low single digit percentages of IT labor.The dot-com mania of the late 1990's was way overhyped, but that doesn't mean that realm was totally devoid of substance. Witness dot-com's modest yet steadily growing share of U.S. retail sales:http://www.census.gov/mrts/www/data/html/04Q4.htmlThis is respectable, yet at least an order of magnitude less than the hype suggested we'd be at today.When the faddish aspects of any mania fade away, there will still be some residual substance of value left.Managements which look to outsourcing for productivity gains are usually mis-diagnosing the source of their IT inefficiencies. If IT labor costs are so high relative to other costs and relative to revenues, such that they represent an attractive target for outsourcing, then that suggests more fundamental organizational problems. One big problem is that too many firms tend to compartmentalize responsibilities for revenues separately from responsibilities for cost controls. This results in responsibility for net profit being pushed so far up the organization that it can't be meaningfully influenced. This keeps marginal-cost/marginal-return analysis at the strategic level without any hope of percolating down to the tactical level.Outsourcing requires a more sophisticated and proficient level of management than is required for inhouse talent. If management is not sufficiently competent to achieve productivity with inhouse talent, then they haven't got a hope of achieving productivity through outsourcing. Competent inhouse labor can compensate for inadequate management.Some industry analysts (i.e. GIGA/Forester) have stated that fewer than 40% of IT projects are ever successful. Even more rare is for the promised ROI to be met or exceeded. If IT really isn't going to deliver the promised ROI, then it makes perfect sense to cut IT costs as much as possible. i.e. If a particular firm is going to give up on IT ever delivering positive ROI for their firm, then what have they got to lose by cutting it to the bone?I'm not advocating such a defeatist philosophy, but I do acknowledge a certain perverse sensibilility in such logic.

kc11415
Posts: 378
Joined: March 16th, 2003, 10:02 pm
Location: United States

### Outsourcing Mania

China's people problemhttp://www.economist.com/business/displayStory ... 39Problems recruiting and retaining workers, particularly skilled ones, are raising the cost of doing business in ChinaCAN China—population 1.3 billion—really be running short of people? In many of the most important parts of its booming economy, the answer, increasingly, is yes. Though China has a vast pool of unskilled labour, firms in the south now complain that they cannot recruit enough cheap factory and manual workers. The market is even tighter for skilled labour. As the economy grows and moves into higher value-added work, the challenge of attracting and retaining staff is rising with the skill level, as demand outstrips supply. The result is escalating costs for firms operating in China. “If you think that China is a cheap place for labour, think again,” says Vincent Gauthier of Hewitt Associates, a human-resources consultancy.The particular shortages mentioned most often are of creativity, of an aptitude for risk-taking and, above all, of an ability to manage—in everything from human resources and accounting to sales, distribution, branding and project-management. ...