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QA & Testing Budgets Are Rising for Financial Services Firms

Research finds IT budget allocation for application quality has grown from 18% to 26% between 2012 and 2014.

As the economy has returned to growth, CIOs within the financial services sector have shifted their focus from maintaining their current IT applications to developing and implementing new systems to grow their business and expand into new product areas. This has created a greater need to support transformational technologies and channels, placing more emphasis on quality assurance (QA) and testing practices. As a result, QA and testing budgets are on the rise as companies strive to ensure their applications are reliable, secure and effective.

The World Quality Report (WQR), the industry’s largest research study on the state of global enterprise application quality and testing practices, conducted by Capgemini, Sogeti, and HP Software, found that the overall IT budget allocation for application quality has grown at a steady rate from 18 percent to 26 percent between 2012 and 2014. It is expected to hit 29 percent by 2017. Within financial services, average spending on QA as a percentage of the total IT budget is among the highest of all sectors, with 24 percent of FS IT budgets allocated towards ensuring application quality, and over half of this (53 percent) allocated to new application development initiatives as opposed to maintenance projects.

The survey found that as many as 52 percent of organizations are investing more in transformational projects rather than maintaining legacy systems (48 percent). This includes developing new mobile, cloud, and big-data applications and systems. With more development, comes more risk. One application failure can quickly turn into a business process disaster, consumer backlash, and reputational damage -- reiterating the importance of QA and testing today.

Multi-dimensional impacts on the approach to testing
The increased investment in technology transformation and renewed focus on QA has also affected how financial services firms are approaching testing models. The WQR uncovered several trends that demonstrate a shift in the way that many firms are approaching QA and testing:

  • Testing organizations are becoming more specialized: The study found that 26 percent of IT executives have an Industrialized Testing Center of Excellence (TCOE), up from 19 percent two years ago. TCOEs are designed to help companies improve testing governance, control, processes, and metrics to increase efficiency and business outcomes.
  • Higher demand for innovation from the testing organization: More than half (54 percent) of IT professionals stated that they’re already using crowdsourcing as a testing technique or planning to try it in the next year.
  • Market forces are changing how companies drive toward deeper intimacy with clients: Greater volumes and more robust data, the all-channel experience, global landscape, and adoption of social media all require that testing be more rigorous, adaptable, and faster in order for firms to respond to and capitalize on new market opportunities.
  • Mergers and acquisitions (M&A) impact on IT: The growing economy has sparked a renewed interest in M&A activity in the financial services sector, which is having a substantial impact on QA and testing teams within firms, as they seek to ensure the seamless integration of the IT systems of all parties involved.
  • Maintaining the quality of mobile applications: Mobile testing is experiencing rapid growth within financial services. Nearly half (46 percent) of financial services executives interviewed in 2013 stated that they didn’t test mobile applications and devices, but in 2014 that figure dropped to 15 percent, demonstrating a larger focus on application quality, reliability, and overall user experience across the mobile channel.

These dimensions are colliding to create an environment where testing is relied upon more than ever before. However, as QA and testing budgets increase, IT leaders are coming under increasing pressure to demonstrate a return on investment (ROI) for their spend on QA. Cloud, mobility, virtualization, and other transformational technologies continue to challenge testing capabilities. However, successful transformation initiatives can also be the lever by which firms are able to drive the biggest ROI.

Leveraging larger budgets to achieve higher maturity testing
The good news is that there has been progress toward achieving higher maturity testing -- such as in the mobile space. Three years ago, the WQR found that 65 percent of IT professionals felt that the most pressing issue in mobile testing was a lack of understanding and investment in basic testing tools. Comparatively, only 34 percent of respondents now cite that concern and 40 percent are frustrated about not having enough time to test.

The research indicated that higher corporate investments in QA and testing has moved along a natural maturity curve, beginning with overcoming basic challenges with tools, processes, and skilled resources to the current challenge of mature mobile testing capabilities not keeping up with the demand. This shift in maturity level proves that the investment is starting to pay off.

There is also a noticeable shift in the degree to which test environments are a significant topic of concern. The research showed that there has been some headway in the areas of security, virtualization, environment uptime, and data.

The future of QA and testing
As financial services firms continue to adopt new technologies and techniques to embrace SMAC (social, mobile, analytics, and cloud), agile, business-aligned metrics, and virtualization, these areas will likely continue to be the main target for investment in QA as firms continue their transformation efforts. Banks in particular are being pushed to update legacy systems and are heavily investing in mobile applications to better serve the next generation of customers. To meet consumer demand and industry regulations, we’ll see banks increase and refine the QA testing processes in the coming years.

As a technology executive, Dr. Kapfhammer has over 20 years of experience in a variety of strategic, operational and managerial roles. He currently serves as a global VP for Capgemini's Financial Services Software Testing Practice. Prior to that, he worked for Bank of America ... View Full Bio
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bfulbright
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bfulbright,
User Rank: Apprentice
1/10/2015 | 4:52:29 PM
Future is Bright for QA and Testing in Financial Services
The biggest, clearest point of this article, as Dr. David Kapfhammer states, is that companies are realizing they cannot maintain legacy environments, in favor of the newer lighter technologies with higher security capacities and mobility due to big data and cloud applications.

These transformative moves require higher and tighter Quality, which is good news for Testing and Consumers. 2014 was a disastrous year for security leaks, as well.

Testing has become more specialized, innovative and is reaching deeper into customer relationships driven by the new mobility.

Excellent Article!!
IvySchmerken
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IvySchmerken,
User Rank: Author
12/11/2014 | 8:22:19 AM
Regulatory impact on Q& Testing?
 Now that the economy is improved, it's interesting to hear that financial services institutions are spending so much  more on QA testing espeically in their "transformational" technologies such as mobile applications, cloud and virtualization. In the capital markets space, do youthink that regulatory scrutiny has been a factor in motivating the trend? After some incidents that occurred with rogue algorithms and exchange outages, regulators have put more emphasis on establishing best practices and policies and procedures for testing systems. Under Reg SCI, recently approved by the SEC, certain entities need to report any system glitches to the regulator. Regulatory oversight may not be a direct cause of firms increasing their QA testing budgets and effforts, but I wonder if it's a factor in the mix since firms want to avoid fines and reputational damage.

 
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