Testing in Financial Services: Towards Optimized Security

(Based on extracts from Capgemini study The Financial Services World Quality Report 2011/12, shared exclusively with Dataquest)

In this age of disruptions and disruptive technologies, most CIOs and CXOs across all sectors are beginning to bank upon new technologies such as mobility, cloud as a service, etc, focusing on cost elimination in IT rather than cost reduction. A major fallout of the global economic crisis has been that IT spending is becoming more flat rather than increasing, while companies are also looking at issues such as compliance and generating growth with an IT perspective. CIOs are thus beginning to spend more of their IT budgets on technologies that will drive both innovation and mobility within the workforce, and are fully aware of the accompanying security, compliance issues.

In such a scenario, could the financial services firms afford to lag behind in the transition or are they also aboard the bandwagon already? While CIOs across all sectors are looking forward to technology advancements and prioritizing cost optimization across the board to derive profitability and maximum RoI, financial services firms too are not far behind where their quality assurance (QA) departments are reorienting their strategies, looking at options for increasing their IT focus on testing, etc.

Dataquest brings its readers a glimpse into an exclusive report by Capgemini - based on a survey conducted for the The Financial Services World Quality Report 2011/12 which generated responses from CEOs, CIOs, CFOs, etc, of several firms including financial services firms.

Post the global economic crisis, QA, and testing as part of it, has become very important for FS firms. Mature, reliable testing tools and processes can bring stability and reliability to core systems while achieving cost savings as high as 50% through fully managed or automated testing services, reveals the study.

The findings are being drawn from an analysis of data gathered for the World Quality Report (WQR) 2011/12, an ongoing collaboration between Capgemini, Sogeti and HP that extensively surveyed global participants, examining the state of application quality and testing practices across different industries and geographies.

 

The latest survey also tried to capture data on outsourcing, security testing, and test data management. For the FS WQR, the WQR responses from 175 FS firms-banks, insurance companies or capital markets firms were analyzed in detail, and additional research was conducted on issues specific to the FS sector, using another survey, for which there were 268 respondents.

The survey report reveals how on one side, technology such as cloud services and mobile applications have been growing, while on the other, it has helped banking and other insurance and capital market firms increasingly use testing for these applications to conform to increasing compliance, security, and growth standards.

The New Normal

"Talking about mobile applications, we are exposing a new normal. Also security and regulations are increasingly a concern," says Govindarajan Muthukrishnan, testing practice and Rightshore leader, Capgemini Global Financial Services. The 'New Normal' for Financial Services: Mobile Applications - the study's findings also reflect the 'New Normal' for the FS industry, featuring different business economics, risk management, and regulatory paradigms that existed prior to the global financial crisis, where QA capabilities are increasingly critical in driving business success.

 

For example, mobile applications must facilitate interactions involving different handsets and operating systems - technologies that are themselves advancing rapidly. The QA departments thus need to acquire new capabilities and tools to make sure such applications stay secure, compliant, and relevant to customer needs.

Deep Contrast in Business Goals

Notwithstanding the common need of aligning business goals and tight testing budgets of these firms, there is a deep contrast in business goals for the various kinds of financial services firms and their IT investments are being aligned to deliver these business goals.

"For banking firms, security and compliance are much more important, whereas growth is of paramount importance for capital market firms," says Govindrajan Muthukrishnan, testing practice and Rightshore leader, Capgemini Global Financial Services.

For example, in the analysis, many banking respondents deemed cost optimization through process and technology advancements (cited by 57%), compliance/regulatory issues (56%), and business growth (53%) to be important or very important focus areas for IT, given the challenges currently facing the FS sector. While among the capital markets respondents, by contrast, 67% indicated growing the business is an important or very important focus, followed by cost optimization (53%).

 

The study points out how using cloud and SaaS models to modernize IT infrastructure and services, reduces complexity, and cuts operating costs, as well as increased agility and speed to market. While among the surveyed FS firms, only 15% indicated they have no plans to migrate applications or hosting to the cloud in the next year, 73% indicated they plan to migrate between 1% and 50% of their applications to the cloud.

"The cloud is not without perceived risks, most notably security," says Govindarajan Muthukrishnan, testing practice and Rightshore leader, Capgemini Global Financial Services, "but the cloud is often a more cost-effective, quicker and easier way to perform testing, even of the cloud itself, especially because the cloud can be used as a separate test environment or as a pay-per-use model."

Testing and Testers

The study also indicates that outsourcing of testing is likely to help FS firms enhance capabilities and value. It shows 70% of FS organizations employ contract testers or outsource testing to third-party vendors, but only 6% have outsourced between 76% and 100%. Separately, only 3% have completely outsourced testing execution.

 

The study further propagates that apart from outsourcing, and third-party contract testers being used for testing, the financial services firms are also moving towards a Testing Center of Excellence approach. 

Adopting a TCoE Approach

As QA organizations at FS firms continue to mature, an increasing number are considering the use of a Testing Center of Excellence (TCoE) to act as a consolidated hub of testing.

The study points out that TCoEs take a long time (often between 6 and 24 months) to operationalize. This is why largely only 1% of FS firms say they already have a fully operational TCoE. Interest in the TCoE approach is however more widespread, with another 10% of respondents saying their firms started to establish a TCoE within the last 2 years, and 45% saying they have plans to leverage a TCoE approach, either in-house or outsourced in the future. At present, though, 44% of FS firms say they have no plans to use a TCoE model.

 

The study further claims that TCoEs offer an ideal model in which to standardize testing practices, methodologies, and metrics across all testing projects, share resources (processes, templates, tools, tips, estimates, etc), reduce costs - cost optimization via 100% automation of identified applications, for example, regression-testing time was reduced by nearly 80% per cycle - reduce time to market due to process standardization, and achieve a more direct and robust relationship between QA and the business.

Regarding the TCoE approach and its viability, "It will work definitely. From the top if you see how testing is evolving, testing has become increasingly a compulsion, and more and more professional. Secondly adoption of IT, tech by clients are making FS firms opt for more production and the firms are faced with much more production issues. Hence, a separate, independent testing point for developers to take care of code applications production and bringing together independent testers will be important," says Govindarajan.

"There are several justifications for setting up a TCoE - the industry has advanced, it has become highly tool driven, the cost and quality issues are so complex that it needs solutions that remain 'independent' of the development world, and the solutions are also available today with tool vendors like HP, IBM, etc, offering the right type of tools for different types of tools; as well as the labor market offering skills and capabilities from full-time test professionals with knowledge and skills on those tools as well as capabilities to solve those cost and quality issues through usage of right testing techniques and methods. However, RoI is going to be difficult to be measured, so is the investment needed; it will depend on the scale," he adds.

Improved QA not Far Away

However, in order to succeed, the study suggests that the future for QA in FS is likely to see greater standardization of tools and methodologies to improve testing, reduce errors, ensure security, and increase speed of time to market. The use of outsourcing, cloud, and SaaS options is also likely to grow so that QA can access the range of capabilities needed to properly manage modern environments and loads, especially on complex and emerging platforms such as mobile.