04 SepGood Cheap Fast = Control Capacity Cost
Some weeks ago a superb picture was posted here on LinkedIn that inspired me. It is a really catchy way of capturing the three qualities that matter to me in my consulting work. 3CAdvisory is about Control, Capacity & Cost. I believe you can align all three of those things.
There is a right way to go about infrastructure in banks and a wrong way. Let’s start with the wrong way. If you only manage cost and want things cheap, you might get some capacity; at current rates offshore resources are about 1/3rd the price of onshore ones for the same price. Swapping expensive onshore for cheaper offshore or even near-shore resources, at maybe 1/2 the price, will not buy you any more Capacity. Just cutting costs by moving the work offshore offers no certainty around Control. Doing things cheaper in a distant location will instantly add the challenge of liaison to the problem.
An example from days at Goldman Sachs might illustrate the point. Following the profit meltdown of 1994, following a Jon Corzine driven losing bet in fixed income, the Goldman partners were behaving as if incarceration in the local poor house was imminent. The Operations partner at the time suggested we reduce the local Swiss team from 7 to 6 and then move 3 of those 6 jobs to London. I pushed back on that one and actually won. My objections were that with 3 team members in each of two locations, lots of time would be needed for liaison. In a small team that would hurt and also, at the Zurich end, having a small team of 3 was not a good prospect to sell prospective team members. “Join our small team of 3” has a very limited appeal, even at Goldman Sachs.
Just addressing Capacity also has its pitfalls. In conversations with my IT colleagues, a recurring thought on resources and priorities is that “Nine women can not make a baby in a month”: Completely politically incorrect, but more catching than decreasing marginal returns. The point is a simple one; once you are in the middle of something, just throwing more people at a problem with the same tools will rarely yield linear improvements. Each extra person will add less and less value.
Addressing Control is the place to start to drive success. With the right processes and tools, the Controls around a business will be solid. That drives Capacity by increasing productivity. If that goes up, then at constant volumes, costs can come down. Now, real life is not quite that simple; you might for example have a small team, say of 5 people. If you can do something about Control and increase capacity, so you have a 10% improvement, it might be somewhere between hard and impossible to lose 1/2 a head. So you can’t easily do the same for less. But, at the very least, you can do more for the same. Now if you have really good Control with fabulously well structured processes and procedures and super tools, then that is a good foundation for off or near-shoring.
Lessons Learned: Good = Control. If you do that right you have Capacity = Fast (or at least in the time available). If you have Control and Capacity, then you have the cases to be CHEAP = Cost.
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