Outcome Based Payment – the modern service delivery method

Over the years, customers looking for software testing services suppliers have opted for body leasing or team leasing as their primary service delivery type choice. More and more companies, however, have started looking for other, more cost-effective and customised ways to order testing services that would fulfil their project needs. At Sii Poland, we have experienced this trend change and decided to satisfy all these needs by offering flexible services on the one hand and bringing more standardisation to both testing delivery and testing processes on the other.

The solution to this growing demand for new, robust and efficient software testing services is an Outcome Based Payment service sometimes called the Testing Factory.

Output Based Payment (the Testing Factory) is a service that assumes that the settlement between the supplier and customer is carried out based on a catalogue of products where each product has its pre-defined unit and price. Customers can order as many products from the catalogue as required to fulfil their testing needs. The price of the service is then calculated as a sum of all the delivered products and is not dependent on the team size or project schedule.

At Sii Poland, we believe the Testing Factory service is the perfect compromise between standard managed services and body/team leasing. While bringing all the advantages of managed services with the reduction of time spent on team management as a prime example, it allows the customer to scale the service based on his current needs without any additional effort needed for change requests processing.

Top three benefits

The top three benefits for the customers who decide to choose this type of service include:

  1. Cost clarity: with a catalogue of available products pre-defined before the service is initiated and the products’ prices independent from the number of involved testers or the order timelines, the customers have clear information regarding the testing costs.
  2. No team management effort: the Testing Factory service relieves the customer from test team management responsibilities; testing team management activities are fully transferred to the supplier, making him responsible for delivering top quality products within agreed timelines.
  3. No downtime/overtime costs: the key features of the Output Based Payment service include settlement based on a catalogue of products where there are no additional costs for downtime, overtime or the onboarding of new test team members. The only cost incurred by the customer is the value of the products ordered from the catalogue.

We believe this type of service is aimed mainly, but not only at, companies dealing with a large amount of simultaneous testing activities and continuous development. Our recent implementations show this type of service brings the most added value to:

  1. Projects delivered in agile/iterative development methodologies: projects delivered in agile methodologies, with the sprint backlog grooming preceding the development start, give a solid base for a precise estimation of the amounts of the products required. The same principle applies in the iterative approach, where the scope of a single iteration gives a perfect foundation for project leads to understanding the expected number of products required to provide a satisfactory testing coverage level. Each iteration or sprint can then be easily evaluated by using a simple calculation of required products and their unit prices.
  2. Waterfall projects: the waterfall methodology, with well-defined requirements and a system specification, gathered prior to the development start, gives a solid base for an accurate test effort and test coverage estimation. It allows the customers to determine the number of products and the cost of testing required for a successful delivery of their systems.

Beneficial for service suppliers

The movement of customers towards Testing Factory type services is also a positive trend for testing services suppliers. Outcome Based Payment services allow vendors to manage their teams more effectively, enabling more traffic between projects and customers, depending on the current demand. Testers, who are no longer locked in a single area, can switch projects and gain experience more easily. It allows suppliers to build knowledge around the customer’s systems among a wider group of engineers, making it easier to scale the service without compromising the highest quality of testing. At the same time, it makes suppliers less prone to staff attrition.

With so many advantages, Outcome Based Payment services come with a price: the time needed for preparations for operational use. The product catalogue has to be prepared and, being the only source of available activities, requires a thorough analysis, multiple discussions and mutual approval. Product prices are defined based on the average cost of testing services across the customer’s projects portfolio. It can make some of them less cost-effective. The specifics of a service based on a products catalogue makes it also much less flexible from the perspective of tasks allocation.

We believe, however, that the benefits gained by customers who decide to take advantage of these types of testing services outweigh the limitations of its implementation.

At Sii Poland, we are glad to deliver testing services using this new, robust and efficient delivery method.

Sii Sp. z o.o. 
Top IT and Engineering services provider in Poland
AI. Niepodleglosci 69 02-626 Warsaw