Principles of Quantitative Development

1.4 IMPLEMENTATION OPTIONS

Once we appreciate the need for a trading platform through which new products can be launched rapidly, we have a few options to choose from.

1.4.1 Outsource to vendor

We can request our vendor to custom-design and integrate the new products into our existing systems, which we are already familiar with. This approach has the attraction that the new product will be native to the existing system, assuring perfect integration, especially in the back-end. In the front-end also, the familiar look and feel of the interface will enhance usability and productivity.

Vendor development, however, tends to be heavy and slow. When we come up with an innovative product, we do not want to wait for months before we can launch it. An innovative product stays innovative only for a brief span of time.

Another disadvantage of this implementation option is that the cost of custom design can be prohibitive, especially if we demand exclusivity on the product developed. The perceived profit attraction of the innovative product can soon evaporate because of the development cost involved. The nonexclusive mode is clearly not attractive because we will see our innovation in the hands of our competitors.

Vendors may be reluctant to accept our quantitative intelligence because of intellectual property considerations. This resistance makes our in-house mathematical talent superfluous. Due to these reasons, vendor development is not the preferred route for deploying new models and products. ...