[R] How to Describe R to Finance People

Marc Schwartz MSchwartz at MedAnalytics.com
Fri Jun 4 18:06:59 CEST 2004

On Fri, 2004-06-04 at 09:19, Paul Gilbert wrote:
> Ko-Kang Kevin Wang wrote:
> >It is not only used by statisticians or scientists,
> >but also econometricians and people in finance due to its cost (FREE)
> >and its powerfulness.
> >
> I think "(FREE)" will distract your intended audience from the real 
> point. In a corporate environment, lots of people argue that free 
> software actually costs more than commercial software because of 
> internal support cost, etc, etc.  These arguments will all hinge 
> critically on the corporate IT support abilities. For R, I have never 
> seen a convincing argument that it costs more, but the real point is 
> that this is irrelevant. If it costs less, that is nice.  If it costs 
> more, then that is what you pay to use something that is better. If they 
> need to, I think people in finance are generally willing to pay, so I 
> think it is a mistake to put much emphasis on the cost. Put the emphasis 
> on how good it is.

I agree that quality and value are important, but I think that the issue
of cost should not be discounted out of hand. Value (for both company
and client) is directly tied to cost.

Cost may be less of a concern for very large corporations to some
extent, though certainly non-trivial as we continue to see companies
finding ways to reduce their cost of operations as an important part of
the strategy to improve profitability. Typically, this is done via
reductions in personnel costs (ie. layoffs, reductions in benefits,
salary/wage cuts, etc.), but IT costs are surely a target as is noted
daily/weekly/monthly in various IT and business trade rags. IT costs are
not just those associated with the initial purchase, but with ongoing
operating costs as well.

I can speak from personal experience, as the President and Owner of a
health care consulting business who has funded this operation with my
own funds, that cost is a significant issue. I do not have shareholders
or private investors providing operating capital with the promise of
future returns on their investments. Every dollar I spend has to be
recovered via client billings or it comes out of my own pocket.

This is not just important for me, but for my clients as well.

The more I spend on "the cost of doing business", the more that I would
have to pass on to my clients to recoup those same costs. My ability to
offer clients reasonable project fees is directly correlated to my
underlying cost structure. There is a market driven threshold beyond
which I could not pass those costs on to clients and still have clients
willing to pay for services.

A product like SAS for example, which I had previously used for a number
of years working for a larger medical software company, is no longer
affordable to me as a small business owner. The last time that I
checked, the annual licensing for a single user commercial license for
Base, Stat and Graph was in the neighborhood of $5,000 U.S. **Per
Year**. That is for _one person_. Calculate those costs for a larger

Even a product such as that other "R like" commercial offering, while
less costly than SAS, still adds to overhead. I would rather allocate
the funds for that product along with my time, to supporting the R
Foundation and this community to repay the value and benefit that I
receive from it (which is nothing short of phenomenal).

The bottom line is that cost is a non-trivial issue. If a company is
willing to pay more for a functionally equivalent product, because the
training and support is (or is perceived to be) superior so be it. That
may enable managers and other decision makers to sleep better at night.

I would however challenge the level of support provided by any
commercial company to that which is provided by this community, given
the depth and breadth of expertise present and the expedience with which
communications take place here.

I use R. My company benefits from it. My clients benefit from it.

..and I sleep just fine (when I do sleep)...  :-)


Marc Schwartz

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