Testing_3.0_P4V

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Testing 3.0
Pricing for Value
Sridhar Throvagunta
Global Head – Test Advisory Services

Agenda
Testing 3.0 – Reimagining the Business
Analyst Speak
Pricing for Value: Context
Pricing Maturity Model: Prototype
Wrap up | Q&A

• Test Sourcing
• An integral part of the business and IT processes creating
business value
• Shared Services, Defect Prevention, Outcome Based Pricing
• Business assurance
Testing 3.0
Testing 3.0 – Reimagining the Business
• 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 2.0
• 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
Testing 1.0
1

Testing 3.0 – Imperatives
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
Outcome & Budget
Goal
Methodology
Measure of Success
1

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.
2

• Premium
• Penetration
• Economy
• Skimming
• Psychological
• Bundling
• Promotional
• Geography…
Price Strategies
• Input based
• Output based
• Outcome based
• Pricing for Value
Price Models
Pricing for Value: Context
• Economy – Market – Technology Confluence
• Marketing mix
• Price sensitivity of demand/ operating profit
• Pricing Power Shift
• Cost – Market – Business Benefit Triangulation
3

Technology
Market
Economy
The Confluence 3

Economy
The State of World Economy
Discretionary Spend is under Squeeze
Extreme Focus on Operational Efficiencies
Expectation of High RoI
Business – IT Synergy Economy
3

Market
Market
3

Technology
• 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
3

Pricing Model Matrix
• Shared risks
• Partnership basis
• Program Mgmt
• Biz objective alignment
• Domain knowledge
•Transformational
 Global Delivery
 Proven processes
Tech expertise
 Effectiveness
Skill availability
Cost arbitrage
Efficiency
Customer Overhead / Risk
LowMediumHigh
Service Provider Responsibility / Risks 
Low Medium High
ServiceProviderValueAdd
Low
MediumHigh
Controlvs.Governance
T&M Onsite
T&M Offshore
Managed Capacity
Fixed Price
Unit / Element
Based
Shared Risk/Reward
Biz Results Based
Incentive Based
4

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
GainSharing /
BusinessBenefits-Based
Low Low Low Very High Low High
Pricing Models: Key Considerations 4

Pricing for Value: Client Perspective
Objective
Strategic
intent of
client
Target
Performance
Measures
Engagement
Model
Preferred
Pricing
Model
Efficiency
IS
Improveme
nt
 Cost reduction
 Service quality
improvement
 Acquisition of new
technical skills and
management
competencies.
 IS Costs
 IS Quality
 IS Productivity
 IS User
Satisfaction
 Traditional
Outsourcing
Contract
 Staff
Augmentation
 Fixed Price
 T&M
 Element
based
 Utility based
Effectiveness
Business
Impact
 Improve critical aspects of
business performance like
increased revenue,
improvement in client
customer relationship,etc.,
 Business Cost
 Business Quality
 Business
Productivity
 Business
Customer
Satisfaction
 Captive
 BOT
 Co-sourcing
 T&M
 Incentive
based pricing
 Risk-Reward
Model
 Element
Transformation
Business
Shift
 Improve the ROI by
generating new revenue or
profit or Come out with
Innovative technology and
gain market share or by
offsetting the cost.
 ROI, ROA
 Revenue
 Profit
 Market Share
 JointVenture
 Risk-Reward
Model
4

The Mythical PMMi Prototype
Level Stage Focus Model Strategy Innovation
1 Initial
Technology
Operations
Staff Aug
T&M
Cost plus
Sales driven
Very Low
2
Managed Project
completion
Managed
Capacity FP
Finance
driven
Low
3 Defined
Cost Time
Quality
Unit/ Element
Market
driven
Medium
4
Quantitatively
Managed
Growth
SLA driven
Risk/ Reward
Outcome
Based
Pricing
High
5 Optimizing
Business
Assurance
Utility
Business
Value
Pricing for
Value
Very High
4

Pricing for Value
Client
relationship
Sales
effectiveness
Risk
management
Revenue
management
Service
offering
5
Pricing
Strategy

Q&A

Sridhar Throvagunta
Sridhar.throvagunta@wipro.com
Thank You
Global Head - Test Advisory Services

Testing_3.0_P4V

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