Here another great essay from our short-list of entries to our essay competition.  All week we will be releasing an essay with the winners finally announced at the end of the week (16 September 2011). Here Orlando Méndez essay on financial applications.

Essay on financial applications

Abstract

In the exercise of my profession, I have mainly worked developing software for financial (decision making) purposes. Six projects at least I can remember. Some for public institutions, some for profit-seeking companies. Regardless of the technology used, these systems were aimed to solve particular problems related to money and time, which is an inevitable dichotomy. Interestingly, two of these projects were canceled during the transition from development to deployment, due to non strictly speaking technical issues. The other four where perhaps successfully deployed and maintained after I left these. Development teams ranged from me and the project leader, to a dozen or so developers. Mostly non-trivial systems, regarding their magnitude. In this essay I argue that (development of) financial applications are as predictable as world-wide economy: seems that works for everybody, but not quite always.

Figure 1: Time = money. the inevitable dichotomy

"Powerful knight is Mister Money", says an expression in my mother tongue^{For Spanish speakers: "poderoso caballero es Don Dinero".}. Thanks to Mr. Money, I could finish my studies not only in my own country but also in the Netherlands. Thanks to Mr. Money, not so long ago I could be evacuated together with my family from a disaster zone, and later repatriated. En fin, thanks to Mr. Money I have been travelling back and forth from Europe to (Latin) America during the last 10 years. And yet, Mr. Money is always difficult to find, and more importantly, to retain. In the rest of my essay, I will elaborate on the following topics:

• THE (IN)STABILITY OF CUSTOMER'S DOMAIN = SUCCESS | FAILURE OF THE SYSTEM. In more than one occasion it has been a decisive factor the customer's domain. One good day they decide that the database scheme has to be half changed, just because operations next year will change. Or when it is not the domain itself, there are (sometimes very hostile) political games between stakeholders that force to an end the ongoing development. I remember at least two clear examples of these situations -one is them I mention in the next paragraph. It is then not suprising that whenever there are conflicting interests or requirements, more often than not the system is doomed to failure. On the other hand, whenever the customers/stakeholders are positively involved, providing feedback and assessing the development progress, normally applications end in successful deployment.

• THE VALUE AND RETURN ON INVESTMENT OF FINANCIALAPPLICATIONS. One of the projects where Ilearned many technical things, was a management system for car parking lots. The problem is that too much money was being lost due to "ant robbery" from the clerks. In Mexico it is called "ant robbery" when persons steal from big corporations small amounts of goods or money, but that summed up represent a considerable loss. In this project, after operating in four pilot parking places for a couple of months, it was obvious the investment in development was worth -probably the payroll of our development team was nearly recovered-, since the system's results demonstrated that the amount of money collected at the lots was actually more than previously reported without the system. Furthermore, such a system had the potential to become a commercial product to sell to other parking companies or even to the government.

• IMPORTANCE OF DECISIONS TAKEN BASED ON AUTOMATED INFORMATION SYSTEMS. Curiously enough I have seen two applications in which their initial good (or at least satisfactory) results worked against themselves, and the projects developing these systems were cancelled. Somehow the organizations financing these projects decided it was better to stop their development... I still wonder whether that was the best decision. It seems that sometimes money has to be "wasted" in order to gain knowledge. Remember the MYTHICAL MAN-MONTH's admonition to build one to dispose [Myth_MM]. I don't know if when a company decides to stop an ongoing project on a later stage, they will eventually do something with the lessons learned. In that sense, organizations are not like organisms because animals for instance learn from past experiences, specially from failure.

• REFLECTIONS AND LESSONS LEARNED AS DEVELOPER WHILE COLLABORATING ON FINANCIAL APPLICATIONS. To keep the businesses going with financial success, you need good information systems. And a general recipe I would suggest that will keep producing good software results is:
  • Database, a solid database management system -DBMS-. By solid I mean a DBMS with at least the following characteristics: reliable (i.e. effective transaction mechanism), scalable, fast, and with good replication/backup facilities.
  • Security. Just one breach in the security of a system, and organizations will loose tens of millions (like in [HeartLand]). With all the care and craftsmanship we software developers put in satisfying (all the rest of) the requirements, security is one we can NEVER relax or compromise.
  • Staff, a development team acquainted with state-of-the art software development techniques, and tools that enable abstraction and modelling mechanisms. I am quite sure that this is the "magic" ingredient. As described elsewhere [Agile], it is rather subjects and interactions more than methods and processes that make projects succeed.

I mention the above, because the reader would not believe the type of techniques and tools that I have seen organizations are using -e.g., some high tech companies intensively rely on spreadsheets that when not paying attention cause a chaos.

Now, we as technical intelligent people always strive to provide the smartest solution with the (hopefully) best design decisions made. Yet for me the question is still in the air to what extent can we model unpredictability, because that is what characterizes the financial domain these days. I know a few "brainy" mathematicians who are able to acceptably model this complicated behavior, but even so, every now and then everybody has difficulty explaining why the stock market is showing a clear decline.

• CRISIS OF VALUES: WEALTH AND WELLBEING, WHETHER OR NOT THESE COME TOGETHER. Finances is just one aspect of economy, probably the most visible for every one. In the economical system we live now (widely referred to as capitalism^{As an interesting sidenote,I have found that some historians regard the Netherlands as the first capitalist country ever. See [hist_capitalism]}), unfortunately there has been a recurrent word associated with it: crisis. I was only five years old when I heard for the first time crisis, and ever since it has been mostly applied to the troubled situation that economy is undergoing at a specific historical moment. Hence I wanted to include a few reflections on this topic.

All goods/services we produce have a value attached. How such value is determined, escapes my knowledge of economy, specially because things have got increasingly complex these days. However, I continually see that what we do, tends to be less worth.

Yes, technology and information systems have enhanced and optimized mass production in many aspects. Yes, now more than three quarters of world's population have a mobile phone to communicate with each other [mobile_stat], and the expectancy of life has considerably increased -for a fair number of countries- in the last two centuries. Yet we are still failing to provide the most essential valuable things to every human being, like clean water or healthcare^{See goals 5 to 7 of United Nations' Millennium Development Goals [MDG_progress}. What is going on? I think somehow the values our western society has promoted since the Industrial Revolution, have lost sight of the things that really should matter.

That is just to name a few situations on the global scale. But also at the personal level, I see that there is an inversion of values taking place. For instance, I used to believe that knowledge is (economical, political, financial) power; now I'm not sure any more: There is a problem the moment I cannot afford to pay the school fee and uniform of my four-year-old daughter... and I have a post-graduate degree! SOMETHING'S WRONG! This is a situation I have experienced myself this year.

You may wonder what is actually the relationship between my personal economical difficulties and the (development of) financial applications. Well, again, somebody determines the value of the job I do, and somebody also decides the value of services like education. Somehow, the value of my work as software developer is not being sufficient to afford amongst others, one of the basic rights that humans should have (in this example, education). And between parenthesis, I am not actually complaining that my salary is low, far from it... but did the information systems failed to give the right information to the decision makers? I leave the answer to you, should you (not) have had a similar problem before.

I cannot avoid to feel that deep in the roots of the economical system we live in these days, the way that wealth is distributed (and hence finances) continues favoring very few.

Conclusions

When I begun to write this essay, I brain-stormed on the topic as much as I could, and got something like Figure 2.

Figure 2 Initial mind map for this essay

I was on the quest for the content as well as the form in which I could present my ideas about financial applications, and actually at moments I felt myself overwhelmed with the number of ideas that came to my mind. I admit it was an enjoyable exercise, as it is to force one self to think and express ideas, in such a manner that the writing remains consistent, with every word in the right place at the right time. Whether I succeeded, I leave it to the readers...

About the content itself, I grant my bias can go to the gloomy/pessimistic side, specially in the light of the uncertain economical times we live in. Yet I have tried to maintain a more equable view. I believe financial prosperity is what has driven many innovations, maybe more than adversity has. However (with the freedom I enjoy here to express my opinion), I question how much accurate software can contribute to stabilize economy so that we do not longer have to rely (too much) on speculations and assumptions made by humans. On the other hand, it might be too risky to entrust financial stability to machines in which humans have put their software ;-)

On a wider view, it requires a long term vision (and commitment) to take the right steps towards a financial system where the faith of nations is no longer subject to the free-market desires (should be read "whims"), but rather it is based upon a rational, fact-based decision making process, supported -of course- by reliable financial applications. Perhaps this is a mere Utopian desire, but if we consider that our future wellbeing might be at stake, the effort is worth.

To finalize -like when handling exceptions in Java or other similar languages- and paraphrasing a bit the Master Programmer, "let the managers be few and the programmers many, so everybody will be productive".[Tao]

Bibliography

Agile, The Agile Manifesto, Beck, K., 2001

Myth_MM, The Mythical Man-Month, Brooks, F., 1975

Tao, The Tao of Programming, James, G., 1996

HeartLand, Security breach cost Heartland 12.6 million so far, Messmer, E., 2009

mobile_stat, mobile statistics 2011, mobi thinking, 2011

MDG_progress, Nations' Millennium Indicators, Nations, U., 2011

hist_capitalism, History of capitalism, wikipedia, 2011

sand_clock, Your Building Broker Perth Utilises The Boom Bust Cycle, yourbuildingbroker

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