Market overview in "Testing" (feb2008)
Software Testing Going Through a Reinvention Process And Is Moving Away From Being a "Necessary Evil" to An Activity On Its Own Right
LONDON and BOSTON, March 10 2008 /Press release -- NelsonHall, the leading independent analyst firm, dedicated to BPO and ITO advice, today announced the availability of its latest research entitled "Software Testing Assessment and Forecast", a comprehensive review of software testing globally, authored by Dominique Raviart, Research Manager at NelsonHall.
Raviart commented, "Software testing is increasingly performed as a 'specialist testing activity' by professionals that conduct testing on a full time basis. This is a significant change from the traditional testing activities, where developers would test their own work at the end of the software development life cycle. Specialist testing services typically bring a wider offering that goes further than the classic functional testing. They rely on structured methodologies to conduct testing projects and enhance software quality. Finally, they increasingly are delivered from testing factories and offshore, rather than provided onsite in a staffing mode."
Key findings revealed in the NelsonHall research report include:
- Specialist testing spending accounts for c. 20% of total testing spending and is happening in majority by U.S. and U.K. clients in the financial services industries and telecom. Demand is spreading across other countries such as the Netherlands, Australia/New Zealand and Nordics to sectors such as energy and utilities.
- Clients are primarily adopting specialist testing services to achieve cost savings by at least 10% and to improve the quality of their software. However, external factors such as mergers and acquisitions, compliance and industry deregulation are leading clients to engage into new software development and therefore, in additional testing activities.
- Specialist testing is typically sourced offshore by U.S. and to a lesser degree by U.K. companies. Clients in Continental Europe have used a different approach that is less dependent on labor arbitrage, relying more on best practices and methodologies.
- A small majority of companies across the world still favor onsite delivery (staff augmentation), whether it is from offshore resources or from onshore staff. Nevertheless, demand is clearly moving towards work delivery from software testing factories both from onshore and low cost countries.
- Companies predominantly purchase specialist testing services on a professional services basis in the form of time and material or fixed price projects. They are keeping ownership of their contracts and are not yet likely to award full responsibility of testing to a third party.
- Managed testing services ("outsourcing") contracts are the exception in terms of number. However, they command high TCVs. Typically, most managed services contracts rely on SLAs such as timelines and headcount ramp up objectives that are relatively easy to measure. Clients and vendors are pushing towards productivity-based SLAs such as number of test scripts executed in one day. Managed testing services contracts with SLAs based on software quality commitment are very rare.
- Clients purchase in majority (c. 55%) specialist testing services from onshore IT services vendors and (c. 35%) from offshore and nearshore IT services vendors. Testing pure-plays catch c. 9% of total spending.
"Specialist testing is attractive to clients because they are viewing testing as a necessary evil," said Raviart. "Companies are fully aware they need to perform testing to allow the software to move into production. However, they also consider testing as an activity that is disruptive to their staff of developers and business users. Furthermore, software testing typically occurs at end of the software development cycle when budgets are under pressure and clients eager to finish the project. Specialist testing offers clients to delegate work to a third party with the promise that testing will be given full attention and provide cost savings."
Within specialist testing services, demand is evolving too. NelsonHall research supports that commodity services -- largely functional testing -- will be under further price pressure and will drive adoption from testing factories and from low-cost countries delivery. Vendors have therefore no choice than to invest into industrialization and offshore presence and move away from a staff augmentation model. "This trend towards commoditization will even strengthen if the economic environment in the U.S. and in Europe indeed slows down," says Dominique Raviart. "Specialist testing is however not only about pricing pressure and offshoring," he added. "Demand is also evolving towards elaborate offerings such as quality assurance consulting. Clearly, demand is becoming more complex and vendors have to develop exhaustive offerings."
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