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Business Value of Testing - The 4R Framework

In my interactions with CXOs on the subject of Testing and QA in their organizations, the most common question I get asked is "what is the business value of Testing and QA activities for my organization?" Like any other non trivial, non mathematical and non axiomatic question there obviously is not a single right answer to this question. Unless, of course, you consider the answer "It depends on your situation" - which in my opinion is the right answer for every management question that can be asked!

Over the years what I have come to realize is that for most organizations the answer will be one (or more) "R's" in what I call the"4R's of testing":

  • Risk Management: Classic example of this "R" is the Banking industry. If you have billions of $'s of payments flowing through your systems every day wouldn't you really make sure that your payment system is thoroughly tested? The risks here are not just operational, but reputational and fiduciary risks.
  • Regulation and Compliance: Great example of this is the Pharmaceutical industry where there are specific regulations around CSV (Computer System Validation) which mandate by law a level of testing on any computer system.
  • Richer Customer Experience: One of the reasons why e-commerce testing in the Retail Industry is such a hot and growing area is precisely because of this. The switching costs on the web for a customer are practically zero so can you really afford a buggy front end? Or for that matter can you really afford a buggy system being used by your CEO, CFO or the Board?
  • ROI: Yes that's true. Today a lot of our applications have moved from the back and mid office to the front office. This means that they have become revenue generating applications (example a trading system for a brokerage house) rather than an expense reduction application. Upfront testing ensures that you improve important parameters like system uptime and performance - after all the cost of a revenue generating application going down for a few hours can be in millions, while the cost of testing it is in thousands.

The business value of testing hence really depends on the value that your organization attributes to each of the 4R's. After all Value = Benefits - Cost, and for each "R" the benefits attributed by the CXO are really determined by the organizational culture on risk and regulation and organizational preferences on customer experience and long Vs short term ROI.

So the answer to the originally posed question still remains "it depends", but perhaps it can now be expanded to "it depends on the value that your organization attributes to risk management, compliance to regulation, customer experience and TCO reduction".

Any guesses on what is the second most frequently asked question I get from CXOs regarding Testing and QA?

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