Testing as a Service (TaaS) for Startups: Opportunities and Challenges for Indian IT Companies

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1 Testing as a Service (TaaS) for Startups: Opportunities and Challenges for Indian IT Companies Author: Prashanth Thimmavajjala, Performance Test Lead, Mindtree Ltd Abstract: The recent developments in the technology space is being led by a lot of startups developing innovative products and solutions using the latest technologies like Internet of Things, Augmented reality, Wearables, Big Data Analytics etc. The quality of the product determines the success or failure of the startup and startups tend to have a very crude way of conducting testing on their products and do not follow best practices resulting in faulty products and customer dissatisfaction. Indian IT companies on the other hand have strong presence in the testing domain but have limited exposure to emerging technologies. This paper tries to explore the possibilities of Indian IT companies offering Testing as a Service (TaaS) to Startups with some changes in the model and also discusses the various benefits both startups and IT firms will have by using this model. It also explores the possible opportunities and challenges for the Indian IT companies when they offer TaaS to startups Keywords: Testing as a Service, TaaS, Startups, Testing services.

2 Introduction Technology is evolving fast and one of the key contributors to it are breakthrough innovations and solutions from numerous Startups across India. Indian startup space has been bustling with a lot of energy following on the success of few unicorn startups. The policy ecosystem is also conducive for startups now with the Make In India campaign and startup-friendly policies being announced by the Government of India. Large number of startups exist and will emerge in the technology space with breakthrough innovation and solutions using the latest technologies like wearables, Internet of Things, Augmented Reality, Big Data Analytics etc. The quality of the products developed by the Startups determines the success or failure of the firm. The products developed will be creating new markets and will need a lot of early adopters to embrace and feel convinced about the product before penetrating the target segment fully. Product quality is of utmost importance to ensure early adoption of the product by the target segment. However, in most startups, product quality is not looked into in detail. Product development takes priority with full resource allocation and faster time to market is what is perceived to provide success in the market. Startups either take recruitment of people with development skills as priority, lack funds to purchase and maintain testing tools or lack people with skills and knowledge to perform the testing activities as they cannot afford to pay. Indian IT Companies have been in the business of product quality testing for many years and have long standing contracts with their existing customers. They have a huge resource pool of people with expert knowledge on testing tools and procedures. Most testing projects are based on time tested technologies that the customers are using and there is little scope for working on the latest technologies as soon as they are invented. This paper tries to explore how Indian IT companies can provide testing as a service (TaaS) to Startups through innovative business models and also discusses the challenges and opportunities it provides to create a win-win proposition for both Indian IT Companies and Startups. Product Quality Challenge at Startups Startups in their very nascent stage typically have limited funds, limited people and limited infrastructure. With these constraints, developing an innovative product fast to reach the target market will be a priority and majority of the people will be hired for development work. Product quality testing is done by the developers themselves with a few happy-path scenarios in the limited time. However, it is at this nascent stage of startups that product quality testing is of utmost importance to make an impact in the target market and ensure speedy adoption and conversion rates. However, startups would not want to spend their limited funds on hiring a testing expert to test their product and instead spend it on other business development activities.

3 Limited Funds Lack of Testing Expertise Focus on Faster time to Market Product Quality Challenge at Startup Priority to Development Effort Limited People Limited Infrastructure Technology Challenge at Indian IT Companies Figure 1: Product Quality Challenge at Startups Indian IT Companies have sizeable testing verticals with a lot of testing experts working on various projects on various technologies. They have deep domain knowledge of testing and also the various tools that can be used. However, all companies work on testing projects involving their customer s products which are on time-tested technologies like J2EE,.NET, Citrix etc. The Indian companies do not have access to any of the emerging technologies as none of their projects use them and there is very limited scope outside the project to explore such technologies. The emerging technologies may take many years to become mature to be adopted by the customers and it is only then that the IT companies get exposed to these technologies. Indian IT companies thereby fall behind and fail to develop their testing expertise to match with the emerging technologies due to lack of exposure to them and products that use them.

4 High Testing and Process expertise on Old technologies Late adoption of latest technologies by customers Technology Challenge at IT firms All customers on tried and tested technologies Very low exposure to latest technologies Outsourcing Software Testing at Startups Figure 2: Technology challenge at Indian IT Companies If the Startups start to consider software testing as one of the key activities to be done for the success of their firm then they might consider hiring testing professionals or outsourcing the activity to other firms. Hiring testing professionals will need consideration about the compensation and benefits and also the cost of procuring licenses for testing tools that might be required for the effort. The Startup might choose to focus on its core competency of product development and marketing and decide to outsource the testing related activity to external firms. When the outsourcing decision is made, there are two types of firms that they could consider: first being the startups that are focusing purely on the testing domain and the other is to outsource it to an IT company with proven expertise in testing processes and procedures. Testing Decision Outsource Hire Testing Professionals as Employees Startup focused on Testing as a niche Indian IT Companies with proven testing expertise Compensation adds to cost, Testing tools to be acquired Figure 3: Testing decision at Startups

5 The option of outsourcing it to another startup focusing only on testing has its own set of challenges, although they might quote lower prices and share similar culture, they might have limited expertise in testing and may not be helpful in all aspects of testing, they might have limited testing tools and limited resources to support the effort, and as any other startup they will have funding and infrastructure constraints and might not be able to make big investments if the testing assignment required. They may also be new to the technology that the startup is working on. (Ref 6,7,8) The option of outsourcing testing activities to an Indian IT company has a lot of advantages as they have proven expertise in the testing domain with a separate testing practice to cater to all kinds of testing required for all types of projects. They also have a large pool of testing resources with varying domain and technology expertise along with possessing access to many licensed tools as well. These companies will be able to use their cash reserves to make big investments if required for any testing assignment. However, they might also be new to the technology that the startup is working on and also might quote higher prices for providing the testing services. (Ref 4,5) Testing Startups Operates in a Niche segment of Testing Will quote lower price for testing services May have limited expertise in testing domains May have limited testing tools with licenses Limited resources and funding available to make big investments if required Might be new to the technology the startup is working on Indian IT Companies Has a proven testing expertise with separate Testing practice Large number of testing professionals with varying technology and domain expertise May have access to multiple testing tools with licenses Can make big investments if required into research for testing Might quote higher prices for providing testing services Might be new to the technology the startup is working on Figure 4: Comparison for testing services between Testing Startups and Indian IT Companies Software Testing as a Service (TaaS) for Startups Startups will gain significantly if they decide to outsource the testing activity to Indian IT companies given their advantages over the testing startups. However, startups will not want to follow the typical model for testing projects in Indian IT companies by having full-time dedicated project teams for their testing effort and get billed for them, due to limited cash reserves that needs to be utilized for other priority activities. This constraint can be overcome by Indian IT companies by providing Testing as a Service (TaaS) to startups where the IT companies will have a pool of testing professionals and pool of tools and

6 infrastructure that can be utilized on a need-basis by paying per use only which is more financially feasible for startups. TaaS will enable startups to have access to professional testing tools and also to the infrastructure required for setting up test lab environment. They will be able to undertake various types of testing activities like manual testing, functional testing, regression testing, performance testing, security testing etc. using the resource pool provided. If the technology is completely new, it will encourage co-operative innovation for both Startups and IT firms to develop new tools and frameworks for testing such products. (Ref 1, 2, 3) Pool of Testing Tools and Frameworks Pool of Infrastructure for creating Test Labs Pool of Testing Professionals TaaS Cooperative Innovation for creating Tools and Frameworks Advantages for Startups Figure 5: Testing as a Service With the TaaS model, Startups will be able to follow world-class testing processes and procedures for their testing activities. They will have access to expert professional and industry standard tools and frameworks that can be leveraged to identify issues with the product. As TaaS covers the length and breadth of all possible testing activities for the product, it helps in uncovering a lot of potential issues that may have been detrimental to the startup when the product would have been launched in the market. This model would be effective in helping startups to identify potential issues and work on fixing them before the product is launched in the market. This would ensure better customer satisfaction, retention and positive word of mouth, making more customers of the target segment to adopt the product thereby leading to the success of the startup. Since TaaS operates on a pay-per-use basis, it becomes financially feasible for startups to consider testing activities as part of the lifecycle of the product before the actual launch. In case the technology is very new and cannot be tested with any of the existing tools and frameworks, then new tools and frameworks need to be developed. Indian IT companies will be able to utilize their cash reserves to invest in innovation for this requirement. They will also be able to use their expertise in other tools and frameworks in developing a customized testing tool for the product. Opportunities for Indian IT Companies The biggest opportunity for Indian IT firms while providing TaaS to Startups is the access to cutting edge technology which they would have otherwise seen only after a gap of two to three years. This early access to the latest in technology space provides a significant early mover advantage to the IT Company.

7 Since they would be working closely with the startup for their testing services, they would be able to develop deeper understanding of the technology and also find applications for it in other emerging domains within the company. It will help the company to develop customized testing tools and frameworks if required for the startup product which gives them a significant competitive advantage that can be leveraged when the technology becomes mature and enters mainstream. When the startup product technology becomes mainstream, the IT Company will have competitive advantage over its competitors as it will have deeper domain expertise and customized testing solutions for it. Startups Ability to follow world-class testing procedures Access to testing expertize and world-class tools Access to infrastructure for test labs Wide range of testing Early detection of potential issues Early fixes makes high quality product Investment for innovation from Indian IT firms Indian IT companies Early access to cutting edge technologies Early mover advantage in the domain Deep understanding of technology before it becomes mainstream Develop customized testing tools and frameworks Competitive advantage in testing when technology becomes mainstream Apply technology to other domains within company Figure 6: Advantages of TaaS for Startups and Indian IT Companies Challenges for Indian IT Companies There are a few challenges when the TaaS is offered to Startups which the Indian IT Companies must address to make the model more feasible. 1) Choice of Startups: Indian IT companies should make a conscious decision of not offering TaaS to every startup that looks promising with their product. Before selecting a startup for TaaS, companies should consider whether the product and technology of the startup is very promising and has the potential to make it big in mainstream technology space, only then the investment in creating product specific testing tools makes commercial sense. It should also be considered whether the product under development has future potential of scaling into multiple domains to find more applications and thereby expand the coverage for testing. The startup products to be considered should also be a good strategic fit to the IT organization so that the growth potential can be leveraged into profitable outcomes, working with startups whose products have no scope with any of the existing domains of the IT firm makes it a futile exercise.

8 Strategic fit to the organization portfolio Potential applications in multiple domains Product potential to make it big in mainstream technology space Figure 7: Factors driving Choice of Startups 2) Pricing model: TaaS model operates on a pay-per-use pricing. This may not be feasible with all Startups as some of them might be still trying to breakeven or others might be looking at growth related investments. This might raise some concerns regarding the revenue source for the IT companies. To overcome these concerns, IT companies will have to come up with newer pricing models which can be customized for each startup being offered TaaS. Pricing models can include a free-period with no costing to the startup at the end of which the charges will be collected for the usage during the entire duration. Other pricing models could be where the entire TaaS is done without any cost to the startup and a percentage share in the revenue or profit for a certain period is given to the TaaS provider. Pricing models can also include providing the TaaS services without any cost only if certain rights are provided exclusively to the TaaS provider like technology access, customer base etc.

9 Pay-Per-Use End of Free- Period Costing Percentage share in revenue/profit Exclusive rights to Technology etc Figure 8: Possible pricing models for TaaS 3) Business Model: Indian IT companies are used to traditional business models of multi-year testing services contracts with Global Development Center (GDC) or Offshore Development Center (ODC) being setup in multiple locations. Working with Startups will need them to only adopt the processes and procedures from the existing model. The teams will tend to be much smaller with a few people with inclination towards working on the latest technologies. Contracts might need to be written around the possibilities of having delays or abandoning the project as there is a lot of uncertainty around the technology that the startup product might be using and its feasibility for testing. Intellectual property rights over the testing tools and frameworks that will be researched and developed during the course of the collaboration will also need to be clearly defined and stated. If any profit sharing or exclusive rights are part of the contract, they need to be clearly stated. Conclusion Testing as a Service (TaaS) was initially intended to serve the testing needs of large companies but it can also be used to serve startups with minor modifications in the approach and the model. TaaS for startups will turn out to be beneficial to both Startups and Indian IT companies and both can reap benefits of this collaboration. It will provide a significant competitive advantage to both the Startups in terms of a quality product and also to the Indian IT companies in terms of early access to technologies with high business potential thereby benefitting the overall ecosystem of the technology world. References: 1) Insights on Business: 2) Testing as a Service: Service-TaaS 3)

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