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October - 2010 - issue > Cover Feature
Software Testing Riding on the Era of Transformation
Christo Jacob
Thursday, September 30, 2010
‘Your pain is my gain’ - the software testing industry has evolved over the years based on this simple mantra. According to the classic definition of Myers, "Software testing is the process of executing a program or system with the intent of finding errors." Today, software bugs are costing the US economy an estimated over $59.5 billion each year, with more than half of the cost borne by end users and the remainder by developers and vendors. The federal study states that the improvements in testing could reduce this cost by about a third, or by $22.5 billion, but it won't eliminate all software errors. Now, the Indian companies have realized the potential opportunity of testing as a business and it is no more only part of software development, as it used to be earlier.

India, having the legacy and advantage on the offshoring model, is quick in terms of realizing that the problem is not about just testing the problem, it is about providing good quality software. This is evident from the fact of all IT majors having testing centers of excellence and offering independent testing service. According to a 2008 report, the global market for software testing stands at $13 billion, of which about $6 billion is being outsourced to offshore locations including India. “Of the $13 billion market, India is acquiring around 70 percent of the market that is $9.1 billion, and is expected to grow by 40- 45 percent,” says Pradeep C, CEO, Edista Testing Institute.

India’s global delivery model is at a competitive advantage in the software testing space too. The ever increasing competition in the international market has forced organizations to adapt to the recent quality practices to patch up with the industry requirements. Therefore, there has been a big shift from just testing to quality testing. During the initial days, testing was largely a manual exercise; today the testers wear the hat of the end users. Every application or software is made considering the end user experience, emphasizing defect prevention. Around four to five years ago, there was a gradual shift from manual testing towards automated testing, and today we are talking about grey-box and white-box testing.

Organizations have realized that improving the final quality through various means and methods is of paramount importance. Earlier, they were interested in functionalities of the products as their main stay and that is where they counted on testing as a specialized manner even reflecting the performance, reliability, and more. But doing this will not help the organizations to create stickiness among the customers now and deepen the relationship, and they are now talking about improving the quality internally in terms of reducing the testing cycle and thus making the outsourcing model more meaningful. More and more customers are looking at agile methodologies, which results in faster time-to-market, being more receptive to customer requirements, reduced cost of delivery, and improvement in quality.
Some organizations, especially the SMBs, are looking at accelerators and re-usable frameworks to further cut down their costs. Another trend is the ongoing inclination of customers towards an outcome-based pricing model. They are aligned with the demand for cost-effectiveness, time-to-market, and reliability. The belief is that two to three years down the line around 50 percent of the contracts would use a hybrid model, where you have elements of both traditional and outcome-based models. Typically, the product development lifecycles and go-to-market (GTM) cycles are shrinking in the light of ever changing business dynamics. Everyone wants to put the product out in the market as soon as possible, capturing the customer share as soon as possible to gain control on the changing business dynamics. Agility, it seems, is paying dividends for such short GTMs and providing a quick RoI. Software as a Service (SaaS) and online solutions are moving towards perpetual beta platforms that can rapidly adapt to the customers’ needs. This also holds true for ERP implementation cycles, which are shrinking by the day. What used to take five years is now being reduced to one year implementation cycle with rapid customizations. Many ISPs (Independent Service Providers) are pitching their testing processes to their clients. But on the flipside, the corporates are internally feeling the pinch.

Followed by global recession, the pressure on margins for corporates (not to mention survival) is high. They are looking for operational efficiencies to increase the margins to retain the operating profits while the top line sinks. Corporates are increasingly betting on digitizing and automating all processes that can be automated, which shall convert to cost savings by downsizing the cost centers.

In the last three to four years, companies have spent a lot of money on customer acquisition. According to a survey by TrialPay, a software provider, software companies spend an average of 39 percent of their revenues on customer acquisition. This number varies dramatically according to company size. Larger companies with revenues greater than $5 million spend only 17 percent, whereas small companies with annual revenues of less than $100,000 spend approximately 54 percent on customer acquisition. Hence, many of them are innovating on reducing the customer acquisition costs and deepening the delivery experience. There are many organizations that are investing internally on developing these processes and making them much more robust and data-centric so that it becomes much more transparent and helps them to get realtime updates on the project delivery. Moreover, the testing companies have realized that talent acquisition costs have gone up. Hence, the ISPs are reducing the cost on the mid level and the senior level and they are trying to have more people at the ground level that can actually perform most of the specialized activities in testing. This has opened the doors to many of the people who can actually provide industry ready talent.

“Now companies are looking for ready talents who can be immediately put on a project, so they don’t need to pay them more. So, we have a model in which that kind of outsourcing is happening in domestic market where the entire training and talent supply function is being outsourced to Indian market,” says Pradeep. Today, ISPs are looking to include training as a part of their business, wherein they are able to get their students placed in their own customer portfolio companies. “For India to be prepared to grab the $9.1 billion pie of the outsourced testing market, the major challenge is to overcome the shortage of skilled resources. According to estimates, there is a shortage of 22,000 testers and potentially there will be a shortfall of 40,000 more in the years to come,” says Pradeep.
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