Original Post Date: Wednesday, February 25, 2009

Author Nassim Taleb describes a Black Swan as an unexpected event that ultimately leads to what best can be described as a paradigm-shift. In his book, The Black Swan, he includes 9/11, the rise of the Internet, Google and the personal computer as Black Swan events. We could not have predicted those events but they have had a huge impact on us.

Even positive Black Swans can be a source of frustration. Since so few people are prepared for them, it becomes impossible to profit from them. The group that is most frustrated by Black Swans are probably those whose jobs involve cost estimation. Cost-estimators rely on past data to forecast costs so it becomes very difficult to estimate the costs of Black Swans. So where are the new Black Swans and how should Cost-estimators prepare?
I think that the new Black Swans are those that deal with smart technology. This category includes:

  • Smart Infrastructure: roads, bridges, etc. that have built-in detection and analysis capacity
  • Smart Energy: While there has been a lot of emphasis on alternative energy, the real paradigm shift will be in a grid that adjust itself to maximum efficiency. This will involve estimating software costs for new systems
  • Smart Healthcare: Healthcare IT will create efficiencies in our bloated healthcare ecology. The digital exchange of records will eliminate redundancy and enable cost-effective delivery. This will usher in the need to develop effective IT project cost estimation.

Many of these technologies are captured in the stimulus. With the blessing of the federal government, we will see venture capital quickly follow suit. So how does the cost-estimator adapt?

First, we must analyze analogous systems. The ATM/Banking System is usually good place to start since there are a lot of similarities, especially with Health IT. There also have been some small-scale implementations of these technologies. Abu Dhabi is building a city of the future that includes smart technology.

Second, we must learn the effect that networks have on cost. Too often, we, cost estimators, wallow in the weeds of systems. We concern ourselves with how many laptops do we need rather than what effect do the laptops working together have on costs. We must ask ourselves repeatedly if the whole is greater than the sum of the parts.

Finally, we must view technology as a service rather than a product. We must evaluate architectures such as SOA, Cloud Computing and Grid Computing. We must analyze how such systems determine requirements and values.

So this is the challenge. The Black Swans have landed. They require estimation to be accurate and thus, proven cost estimating tools must be a part of the equation. Now, we need to shift the way we approach our work and answer the call.