Analytics Consulting for Model Development

November 19, 2012 — Leave a comment

You cannot outsource your reference models to consultants without having the internal or at least independent ability to inspect and validate the model yourself.  The outside consultant has an incentive to make the model look better than it really is.  There are many layers of technical work that a consultant for hire (most anyway) will approach differently, including rigorous sampling and cross validation to ‘break’ the model.

A bad model is not always obvious and you are committing a very high level of trust to an outside firm if they are doing all the work.  At a minimum, you should retain a holdout set of data to validate the model yourself.

More broadly, outsourcing your model development resigns this activity to a commodity play.  And, it may incidentally invite IT into the picture as outsourcing is very much a part of their business model.

Net: have your own capabilities to cover the core science. Don’t outsource the entire project.  Let the consulting firm know up front you will keep a holdout set.  Do not accept a ‘black box’ algorithm.  Do not give the consultant any data until you have agreed on the terms of a fixed price with contingency.  Do not go for any value based pricing and give away money needlessly.  Do not go for a subscription model unless you must host it.  The market currently favors buyers.

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