The upcoming price revolution in the IT services sector- A perspective for software testing vendors

For years IT outsourcing companies have charged customers for the time and material deployed on projects as a preferred model of engagement. While this modus operandi is understandable given the unexpected changes involved in the work, it also has meant that inefficiencies have been passed onto customers. Customers too have taken it in their stride justifying the engagement as a cost of flexibility. In fact, most of the time fixed bids are skewed so much that customers are left with no other option

When it comes to the software testing industry, over the years this model has also turned out to be counter intuitive to achieving maximum automation in the shortest duration possible, especially in areas of regression or UAT.

Well if you are a customer shopping for IT/ software testing services there is good news. While the global slowdown ensured that vendors were pushed to renegotiate contracts to price much lower, the slow recovery has ensured that there is innovation in this area. Today, customers are demanding fixed price projects with an illustration of ROI up front, at times they are forcing vendors to link themselves financially to end outcomes and if nothing they are pushing for rates on time & material engagements that are just not affordable. The whole premise for this is the ability to justify costs upfront and gain visibility in the end outcomes or ROI.

The way I see it, the next 5 years will see the time & material model die a slow death. In fact it might just happen faster than that. In addition to customers driving this change, most vendors would just opt for fixed bid projects for its profitability. Increasingly, I see our engagements moving in this direction and the openness to do so is encouraging.

Achieving a health mix of customers across different engagement models is the need of the hour. What are your thoughts?

Hari Raghunathan | AVP | Zen Test Labs

Follow me on Twitter: hariraghunathan

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