March 1, 2011 – Keeping up with customers' innovation requirements and regulators' demands is a 24/7 job at Bank of the West. The $60-billion asset bank does plenty of custom application development, and is constantly importing new apps from third-party vendors such as FIS or Fiserv. For Andy Olveira's group, that means a lot of testing-130 projects in 2010 alone.

"A good chunk of our work was testing, and we were good at it," says the bank's vp and applications manager. "Our bank has been rated the highest in customer service by JD Power & Associates three years in a row. We have to be at that level of quality."

But maintaining the kind of quality testing rigor that Olveira required, and meeting rollout deadlines set throughout the organization, created peaks of high-demand testing time that taxed internal resources. Olveira began looking for an outsourced testing service to handle the peak demand. There were plenty of outsourced technology shops out there-both domestic and foreign. But, "I was looking for a testing specialist," he says. "I wanted to get the highest level of domain expertise in testing."

Bank of the West eventually went with AppLabs, an India-based testing firm that's been in the business of just testing since 2000. "We wanted a partner that would take us from good to great in testing," Olveira says, "To allow us to continue to deliver innovative products and services to our customers while we were dealing with really big acquisitions, upgrades, or regulatory demands."

Olveira wouldn't discuss Bank of the West's specific cost savings, but says they were exactly as projected. Raja Neravati, AppLabs svp of global delivery, says banks can expect to shave from 30 to 35 percent from testing costs when they outsource the work, not to mention promised gains in quality and productivity.

"We are able to bring down post-production defects from six to eight per release to almost none," says Raj. "We reduce them almost 70 percent."

AppLabs is one of the few pure-play testing companies in the sector, with work in financial services and other verticals. It has about 2,500 employees, and about 10 active engagements in North America. But all of the outsourced IT firms have testing groups; AppLabs competes with everyone from Infosys and CSC to Accenture and CapGemini.

Analysts say testing is one of the fastest growing areas of IT expenditure, with a 5.2 percent CAGR expected over the next four years. External standalone testing expenditures are the fastest growing area of the testing market, says Nick Mayes, senior analyst with Pierre Audoin Consultants, in a recently released report "Worldwide Testing Services Market 2010-2014."

Vineet Hans, who heads up CapGemini's testing practice for its North American Financial Services business unit, says like AppLabs', his business has picked up dramatically in the past year with efforts at cost efficiency, cutting cycle time and regulatory compliance pushing banks to consider outsourcing their entire QA process. The other trend QA experts are reporting is a rising profile for quality assurance at many institutions. "The focus most organizations used to have around testing was at a project level," Hans says. "But now it's at the CXO level. It used to be about quality, now it's about brands."

And outsourced QA firms are also playing a larger role in transformational initiatives versus isolated technology projects. And those banks that have mature testing groups and practices are moving to the next level: the creation of enterprise-wide testing centers of excellence, where the testing function becomes a shared service across the organization with one view of testing and quality. Accenture has created a number of testing COEs for its banking clients.

"The primary benefits are standardization of all the ways you do testing-the methodology and process," says Alex Pigliucci, a senior executive in Accenture's financial services group.

The other development in testing is a trend that moves the requirements upstream. Instead of having a QA vendor get involved as the last step before an application goes into development, many are now finding a voice during the requirements phase. Pierre Audoin Consultants' Mayes agrees. "Organizations are increasingly aware that in order to deliver truly effective testing, it needs to be considered at the very start of development," Mayes wrote.

This story originally appeared on Bank Technology News.


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