Heavyweight Internet Group Newsletter
Issue 10 – Do You Arbitrage?
August 1, 2005
by Sean Hull
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Do You Arbitrage?
While traveling in Europe on business for the last couple of
weeks, I’ve been devouring Tom Friedman’s book The Lexus and the Olive Tree. It’s subtitled “Understanding Globalization” but could have
just as well been “keeping up with the rush of technological change”. Wha
tever your opinions on globalization & outsourcing, these forces of change,
along with disruptive technologies like the Internet and VOIP are flattening the
world and making it smaller and faster. This both helps busines
s in providing a more efficient field on which to play, but also makes it more c
ompetitive as well.
In particular he discussed Arbitrage, that branch of finance about
profiting from disparities of information about markets. Having
information or knowledge that some group of people or businesses don’t have isn
‘t enough, finding a way to put it to use helping people, that’s the tough part.
As technological change accelerates this becomes more and mo
re relevant in IT. For example, companies are taking advantage of new tech
nologies such as Voice over IP to completely sidestep the traditional telephony
providers and saving a killing in the process. Om Malik, the aut
Or take the example of Cendant Travel who has managed to save a bundle on an upgrage of their Orbitz and CheapTickets.com airline travel system by choosing not to go with a mainframe solution, but rather a 144 server Linux solution.
Of course these are two success stories, and just as with financial arbitrage, in
formation arbitrage can be risky. Finding other businesses that can portray the trials and tribulations, along with plenty of research, and testing
are crucial to avoiding a big waste of money.
Good consulting is all about this type of information arbitrage. Knowledge of one area of IT is not enough. You need experience with Operating Systems from Windows to Linux, MacOS to HP-UX. You need a touch
of networking knowledge, and a good head about security. And you need to have a sense of what troubles end users really struggle with. On the other
hand you also need to juggle different disciplines, which gives you a very broa
d view of the business. One day you are thinking about a proposal, and fra
ming and pricing that fits the clients budget. The next day you are thinki
ng about technical problems and how to solve them within that structure you’ve p
ut together. You’re thinking about promises, and timelines but also releva
nce and context. There is always a bigger problem to solve, always a
complex way to look at a problem. The trick is often distilling a problem
down to it’s essence and focusing on that to bring out the solution as efficien
tly as possible. And the truth is sometimes you make guesses. Based
on all your years of experience, and diversity of encounters with problems at clients in various industries, you use your gut feeling to eliminate and focus on
the relevant. Of course there is plenty of science, and investigation, but the efficiency is often a function of such intangibles.
Good consulting though is also about the story telling. It is the non-technical side, conveying, distilling, and making analogies. Information such as this helps business management make the right decisions based on budget, short and long-term expectations, and customer needs.
Consider all of these factors the next time you weigh and delibe
rate over outside resources for a project. Although fixed fee projects sho
uld be fairly easy to compare assuming you’ve spec’d out the bounds well,
hourly billing can be very misleading, a comparison of apples and oranges.
Also consider a wider net of experience than just the particular need of
the moment. Security vulnerabilities, or efficiencies of other components
of your infrastructure may be discovered, getting more for your money.