QAI STC 2012 Plenary Keynote: Testing 3.0 - Pricing for Value
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The document discusses the evolution of testing services, particularly focusing on 'Testing 3.0' which emphasizes shifting from traditional testing activities to strategic business outcomes and value generation. It outlines various pricing models and strategies, including outcome-based pricing, which align with technological advancements and market demands, aiming at improving operational efficiencies and client satisfaction. Moreover, it addresses concerns from CFOs regarding achieving business benefits in the context of testing services.
![Testing 3.0 – Reimagining the Business
Testing 3.0
• Test Sourcing
• An integral part of the business and IT processes creating
business value
• Shared Services, Defect Prevention, Outcome Based Pricing
• Business assurance
Testing 2.0
• Outsourcing
• An investigation conducted to provide stakeholders with
information about the quality of the product or service under test
• Part of SDLC/ PDLC
• Standardized techniques and procedures
• Better quality, improved time to market and reduced cost
overruns
Testing 1.0
• Insourcing
• Software Testing is the process of executing a program or
system with the intent of finding errors. [Myers79]
• Part of debugging process and is dynamic
• Adhoc testing, uncontrolled, reactive and undocumented
• Cost overruns
3
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QAI STC 2012 Plenary Keynote: Testing 3.0 - Pricing for Value
- 1. Testing 3.0 Pricing for Value Sridhar Throvagunta Global Head – Test Advisory Services 1 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL
- 2. Agenda Testing 3.0 – Reimagining the Business Analyst Speak Pricing for Value: Context Pricing Maturity Model: Prototype Wrap up | Q&A 2 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL
- 3. Testing 3.0 – Reimagining the Business Testing 3.0 • Test Sourcing • An integral part of the business and IT processes creating business value • Shared Services, Defect Prevention, Outcome Based Pricing • Business assurance Testing 2.0 • Outsourcing • An investigation conducted to provide stakeholders with information about the quality of the product or service under test • Part of SDLC/ PDLC • Standardized techniques and procedures • Better quality, improved time to market and reduced cost overruns Testing 1.0 • Insourcing • Software Testing is the process of executing a program or system with the intent of finding errors. [Myers79] • Part of debugging process and is dynamic • Adhoc testing, uncontrolled, reactive and undocumented • Cost overruns 3 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL 1
- 4. Testing 3.0 – Imperatives 1 Testing is about looking at Assurance function as driving more of outputs, outcomes and KPIs rather than just performing certain activities. CHARACTERISTIC TODAY TOMORROW Testing as an Activity Assurance as an Outcome Find Software defects Find business process failures SDLC aligned Industry aligned Test Completion Purpose Readiness Productivity Efficiency Software Quality Acceptable Risk Reporting Advisory Based on Development Effort Based on risk and time to market Goal Methodology Measure of Success Outcome & Budget 4 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL
- 5. Analyst Speak Customer-centric pricing strategies enabled by technological advances Shift towards Fixed Pricing/ Outcome Based enabling client’s ability to innovate and cut time to market Adoption of outcome based pricing in offshore contracts is picking up Moving from cost burden to value generation CFOs are still concerned about achieving business benefits from IT. 5 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL 2
- 6. Pricing for Value: Context • • • • • Economy – Market – Technology Confluence Marketing mix Price sensitivity of demand/ operating profit Pricing Power Shift Cost – Market – Business Benefit Triangulation Price Strategies • • • • • • • • 6 Price Models • • • • Premium Penetration Economy Skimming Psychological Bundling Promotional Geography… Input based Output based Outcome based Pricing for Value © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL 3
- 7. 3 The Confluence Economy Market Technology 7 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL
- 8. 3 Economy The State of World Economy Discretionary Spend is under Squeeze Extreme Focus on Operational Efficiencies Expectation of High RoI Business – IT Synergy 8 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL Economy
- 9. 3 Market Market 9 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL
- 10. Technology 3 • Service Oriented Architecture: SaaS | TaaS | PaaS • Enterprise Software over the Internet through Common Application Platform • Emergence of smart gadgets: Mobiles, Tablets & Beyond… • Open Source Software • Component Software • SoCoMo • Crowd Technology 10 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL
- 11. 4 Pricing Model Matrix Customer Overhead / Risk High Skill availability Cost arbitrage Efficiency Incentive Based Medium Fixed Price Unit / Element Based Managed Capacity T&M Offshore T&M Onsite Low Medium High Service Provider Responsibility / Risks 11 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL Control vs. Governance High Shared Risk/Reward Low Global Delivery Proven processes Tech expertise Effectiveness Low Biz Results Based Service Provider Value Add • Shared risks • Partnership basis • Program Mgmt • Biz objective alignment • Domain knowledge • Transformational Medium
- 12. 4 Pricing Models: Key Considerations Pricing Model Flexibility Transparency Predictability Innovation Client Risk Service Provider Risk T&M High High Low Very Low High Low Managed Capacity Medium High Low Low High Low Open Book High High Low Low High Low Unit-Based/Use-Based High* Medium High Medium Low Medium to High Incentive-Based Low Medium Medium High Low High Shared Risk/Shared Reward Medium High Low High High High Low Low Very High Low High GainSharing / Low BusinessBenefits-Based 12 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL
- 13. 4 Pricing for Value: Client Perspective Objective Strategic intent of client Target Cost reduction Efficiency IS Improveme nt Service quality improvement Acquisition of new technical skills and management competencies. Performance Measures IS Costs Engagement Model IS Productivity Traditional Outsourcing Contract IS User Satisfaction Staff Augmentation IS Quality Business Cost Effectiveness Transformation 13 Business Impact Business Shift Improve critical aspects of Business Quality Captive business performance like Business increased revenue, BOT Productivity improvement in client Co-sourcing Business customer relationship, etc., Customer Satisfaction Improve the ROI by generating new revenue or profit or Come out with Innovative technology and gain market share or by offsetting the cost. Preferred Pricing Model Fixed Price T&M Element based Utility based T&M Incentive based pricing Risk-Reward Model Element ROI, ROA Revenue Profit Market Share © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL Joint Venture Risk-Reward Model
- 14. 4 The Mythical PMMi Prototype Level 1 2 Stage Initial Managed Focus Cost plus Very Low Sales driven Project completion Managed Capacity FP Finance driven Low Cost Time Quality Unit/ Element Market driven Medium 4 14 Innovation Staff Aug T&M Defined Quantitatively Growth Managed Optimizing Strategy Technology Operations 3 5 Model Business Assurance Outcome SLA driven Based Risk/ Reward Pricing High Utility Business Value Very High © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL Pricing for Value
- 15. 5 Pricing for Value Client relationship Service offering Pricing Sales effectiveness Strategy Revenue management 15 Risk management © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL
- 16. Q&A 16 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL
- 17. Thank You Sridhar Throvagunta Global Head - Test Advisory Services Sridhar.throvagunta@wipro.com 17 © 2012 WIPRO LTD | WWW.WIPRO.COM | CONFIDENTIAL