Meghaduta - Thinksoft Newsletter (April'13)

T r u s t t h e E x p e r t s

ISSUE 02 JULY 2013

Why the BFSI sector desperately needs Testing SpecialistsGlobally, the BFSI sector (comprising of Banking, Insurance, Capital Markets, Payments, Settlements, Treasuries and Exchanges, Credit Card processing and Central Banking organizations) is the largest spender on IT. Operating in a very competitive environment this sector deploys some of the most advanced IT capabilities to provide its customers with a regular pipeline of innovative products, offerings and services.

These are driven by changing customer needs, technology advancements, innovations, changing regulatory frameworks, competitive pressures that shorten the time-to-market and the unrelenting need to drive down costs. A stringent regulatory environment also necessitates regular refurbishing and up-gradation of systems and applications.

The sector places great emphasis on business-ready, first-time-right approaches due to the prohibitive costs of failure. Getting to market speedily is also crucial. This applies both to new, large transformative projects as well as regular ''business as usual'' work.

Consequently, the global market opportunities for BFSI applications testing are substantial and some estimates peg this at US$ 7.2 billion (just for India based testing services by 2020). Independent testing entities are expected to garner a substantial portion.

NASSCOM’s strategic review report of 2013 cites Software Testing and IS Services as the two areas responsible for the steady growth of IT Services exports from India. These two sectors grew 50% faster than the industry average, where Software Testing exports was expected to touch USD 3.1 billion up from USD 2.8 billion in 2012.

Big Data based analytical frameworks, mobility applications etc in the financial sector and growth in volumes resulting from growing financial inclusion only means that ‘testing opportunities ‘will mushroom along with a corresponding rise in the challenges faced to mitigate the risks involved. Thus there is an increasing use of automated testing tools, new UAT frameworks that factor in user-experience, crowd based test delivery platforms and domain expertise based test offerings.

In order to tap into these opportunities and meet the challenges successfully there is a crying need for pure play specialist testing organizations that harnesses the experience and expertise of a multitude of specialists. The old order of “staff augmentation” will not pass muster.

The need of the hour is for ‘expert chefs’ and not ‘contract cooks’.

The Cloud Messenger

The fast emerging cloud, mobile and big data applications could increase choices for individuals and drive financial inclusion initiatives world over.

In the developing world the access to financial services, especially banking, has been limited in spite of the enabling legislations and initiatives of the governments. Much of this could change with mobile and internet connectivity becoming pervasive across rural areas where most forms of infrastructure is hugely lacking. Further, Cloud could bring down the barriers for new players by leveling the field for access to latest technology and applications. Crowd funding, while still in its infancy, and mostly a developed world phenomenon, could bring about financial disintermediation for individuals and small businesses for their funding needs. The disintermediation, if harnessed well, and rightly regulated, could be beneficial to individuals and small businesses. The most important transformation could be brought about by Big Data. This technological advancement in analytics will help firms to build "insight" from all the market data in their "sight". It could therefore enable firms to "customize" products for individuals and businesses in ways that were not possible before. In parallel the challenges in getting it right the first time would grow and if undue hardship to the masses is to be avoided the associated risks would have to be effectively, efficiently and speedily mitigated.

Asvini Kumar Chairman and Managing DirectorThinksoft Global Services Ltd

Meghadūta ISSUE 02 JULY 2013 2


Sending and receiving money through the good old Post Office system is expensive. In addition to paying a percentage of the total transfer amount in fees, they end up spending on tips and other indirect costs.

Banks offer the cheapest method for sending money. But very few poor people use banks, largely due to the difficulty of travelling to the nearest branch, obtaining the documents needed to open an account, and waiting in queues to send or receive a payment. The upshot is that the poor tend to be excluded from the organized financial system.

Addressing the needs of those who fall through the cracks of this grid, two entrepreneurs – Abhishek and Abhinav Sinha – created a software program, 6 years ago, that allowed migrant workers in cities across India to send money to their families using a cell phone. Their company, Eko Financial Services Ltd., now works with two major banks – State Bank of India and ICICI Bank - to offer financial services to poor and low income customers using local corner stores, pharmacies, and airtime resellers as agents.

By harnessing the huge potential of domestic remittances as an anchor product, innovators such as Eko, mobile phone operators and even commercial banks hope to tap a huge potential market in India, where three quarters of the 1.25 billion people live on less than INR 80 a day.

Mobile banking can benefit those who were previously thought “un-bankable” either due to their meager savings or because they live in remote and inaccessible places. It can revolutionize banking for millions in the country who are left out of the formal system, and help them use it for transactions - ranging from sending money to far-away relatives or paying school fees.

The mobile phone revolution has the potential to dramatically transform the lives of the nation’s rural poor. An estimated 8 million rural Indians who own mobile phones do not have access to banks. Intense competition and innovation within the telecommunications sector in the last decade has catapulted India into the largest and fastest-growing mobile phone market in the world. Therefore, India is uniquely poised to make use of mobile banking technologies as a conduit for not only bridging the digital divide, but also fostering financial inclusion.

From 2005 onwards, the Reserve Bank of India, India’s central bank (RBI) has recommended that banks increase access to banking services for the “unbanked” population using the mobile payment (m-payment) systems.

Following money, as it courses through the Indian economy, offers a fascinating glimpse into how the country’s financial system works, and how parts of the country remain stuck in yesteryears.

Although many of India’s cities have flourished during the years of economic prosperity, the country’s interior remains poor and disconnected from the more modern aspects of the financial grid.

Take the case of migrant laborers, whose living is based entirely on the cash economy. How do they send money home? Without access to systems that permit transferring money conveniently, safely and cheaply, millions of domestic migrants face this dilemma regularly.

Professor S Raghunath specializes in Strategic Alliances and Strategic Leadership. He teaches post-graduate and doctoral Courses in Alliance Management, Strategic Networks, Corporate Strategy, E- Business strategies and models and Strategic Management in the Media and Entertainment Industry. He leads IIMB executive programmes on Strategic Issues in Alliances and other related areas. He was a Visiting Scholar at the Graduate School of Business, Stanford University and also a Visiting Professor at INSEAD, France; HEC Paris; University of Buckingham, UK; RMIT School of Business; Melbourne, Australia; and LBSNAA, Mussoorie. He is presently the Dean Administration at IIMB and the India Chapter Chairperson of the Academy of International Business (AIB).

Inclusion through Mobile Banking and Direct Payments

In Cell Phones We Trust!



BenefitsMobile banking can be a cost effective way for cashless recovery or payment for services such as insurance, pensions, cash transfer (NREGS welfare payments), deposits and investments, loan repayments etc.

Census 2011 data indicated that half of India’s homes have cell phones, though they do not have toilets and that as much as 97% of all telephone connections in the country are cellular. This provided the impetus for the government to step up initiatives that harness mobile technology to ensure financial inclusion.

Elsewhere in the world

1. USA: The Community Reinvestment Act (1997) requires banks to offer credit throughout their entire area of operation and prohibits them from targeting only the rich neighborhoods.

2. UK: A Financial Inclusion Task Force was constituted by the government in 2005 in order to monitor the development of the process

3. France: The law on exclusion (1998) emphasizes an individual’s right to have a bank account.

4. Germany: The German Bankers’ Association intro-duced a voluntary code in 1996 providing for a so-called “everyman” current banking account that facilitates basic banking transactions.

5. South Africa: A low-cost bank account, called Mzansi, was launched for the financially excluded people in 2004 by the South African Banking Association.

6. Africa: During 2011 ten African countries; Burundi, Ethiopia, Guinea, Kenya, Malawi, Nigeria, Rwanda, Tanzania, Uganda and Zambia made specific commit-ments towards the Maya Declaration; a statement of intent to make financial inclusion a centerpiece of national efforts for poverty reduction and economic stability.

7. Others: Seven other countries namely, Brazil, Fiji, Mexico, Pakistan, Paraguay, Peru and Philippines have also made specific Maya Declaration commitments during 2011

Mobile banking also has an edge over internet banking. In case of online banking, you must have an internet connection and a computer. This is a problem in developing countries. However, with mobile banking, connectivity is not a problem. One can find mobile connectivity in the remotest of places also where having an internet connection is a problem.

India’s Rangarajan Committee on Financial Inclusion (2008) defines financial inclusion as “ensuring access to financial services, including timely and adequate credit where needed to vulnerable and low-income groups, at affordable costs.”

Five years after the Planning Commission and the Central Bank of India declared “a bank account for every household” as a primary policy goal, almost 40 percent of India, or 135 million households, still remain unbanked.

While banking in urban India has achieved more than 100% penetration (many urban Indians have more than one bank account), rural India lags far behind with only 19 percent penetration.

The reason for this situation is that rural India is deemed unprofitable for traditional banking operations. Since 2005, though the RBI has made efforts to encourage rural banking through greater government involvement in enrollment and cheaper agricultural loans, it has met with only marginal success.

However, the Government of India is determined to achieve financial inclusion through digital money and is taking aggressive steps to see this happen.

The gradual regulatory evolution to support ‘Business Correspondent Network Managers’ (BCNMs) and banks in their outreach efforts continue; the results are beginning to emerge! While the emphasis continues to be on numbers, the targets are such that large-scale outreach infrastructure is being built in a short time frame, with an agent covering every village with a population greater than 2,000. This, coupled with the government’s resolve to move to cash-based subsidy transfer and social security payments systems, will ensure mobile transactions.

New momentum around branchless banking is shaping the financial inclusion agenda. Domestic remittances and government payments are driving the electronic money market. If these payments can be translated into banking that goes beyond basic bank accounts – offering savings, insurance, and loans – they will make a major impact on financial inclusion in India.



(#) The new acts represent a consolidation of the Banking and Financial Institutions Act 1989, Islamic Banking Act 1983, Insurance Act 1996, Takaful Act 1984, Payment Systems Act 2003 and Exchange Control Act 1953. Among the features of the new legislation is a focus on ‘Shariah’ compliance and governance in the Islamic financial sector. The IFSA provides a comprehensive legal framework that is fully consistent with Shariah in all aspects of regulation and supervision, from licensing to the winding up of an institution, said BNM. Xtract from http://themalaysianreserve.com/main/sectorial/islamic -finance July 1, 2013 and ‘Malaysia’s new regulation covers both Islamic finance and conventional FS’ on http://www.bobsguide.com July 4, 2013 (#) The National Payments Corporation of India (NPCI) today launched its e-commerce solution named 'RuPay PaySecure' that will enable all RuPay card holders to make online

payment. RuPay; the only homegrown payment solution, has already crossed three million cards within two years of its launch and RuPay debit cards are being issued by 20 commercial banks, 32 regional banks and over 75 co-operative banks. Extract from the PTI report of Jun 21, 2013

(#) YOU can tell a lot about central banking from its architecture. America’s Federal Reserve is square, squat and solid. The European Central Bank (ECB) is an imposing tower. The Bank of England looks like a fortress at street level, with no windows and thick walls. They are all powerful places, and private ones. Xtract from ‘Three men in a boat’ – Review of the book ‘The Alchemists’: Three Central Bankers and a World on fire by Neil Irwin – The Economist May 18, 2013

Prof Anindya Ghose (AG) of New York University’s Stern School of Business, in conversation with Abraham Kuruvilla (AK) on issues relating to big data and the Professor’s experience with crowd funding.

AK: Prof Ghose I hear that Big Data is defined by the 3Vs of Volume, Velocity and Variability. Would you illustrate these parameters for the benefit of both technologists and business users?

AG: Yes, Big Data is all about Volume, Variety, Velocity and its unstructured nature. Some three billion gigabytes of data is being generated every day, say the equivalent of information stored in a thousand million filing cabinets. Every second, there is more data flowing across the Internet than what was stored on it 20 years ago. Another contrasting anecdote is that today an average person processes more data in one day than was done in the 1500s in one’s entire lifetime. It is being generated, from messages, pictures, video images, social media, cellphone signals, turnstiles, on-line shopping, automated machines and so on in a variety of ways. All this is real time data, and much of it from sources that didn't exist a decade ago. It is essentially dynamic and unstructured data, being generated at very high speeds. Such data is typically difficult to organize in conventional databases. By inferring interesting patterns and critical insights into customer behaviour and their underlying causes, its analysis could enable companies gain an edge over competitors.

Professor Anindya Ghose is a Professor of Information, Operations, and Management Sciences and a Professor of Marketing. He is the co-Director of the Center for Business Analytics at NYU Stern. He is the Robert L. & Dale Atkins Rosen Faculty Fellow at NYU's Leonard N. Stern School of Business. He is also a Daniel P. Paduano Fellow of Business Ethics at NYU Stern. His research analyzes the economic consequences of the Internet on industries and markets transformed by its shared technology infrastructure. He is an expert in quantifying the economic value from user-generated content in social media; estimating the impact of search engine and display advertising; modeling consumer behavior on the mobile Internet; modeling the impact of Internet-based crowdfunding and crowdsourcing markets; and measuring the welfare impact of electronic markets.

From Asia and The Alchemists

Building Customer Insight through Big Data



AK: High volume of data in structured and unstructured form has been around for a long time in large businesses. So, why this recent hype around it! Is it technology driven or is it market driven, or is there some new technology that has come to the forefront? Or is it being driven by competitive forces, driving more businesses into mining more data?”

AG: “Yeah, I would say all of the above. I’ll take the relatively narrow perspective of the marketing world. So over the last few decades, what we’ve seen is that decisions have been primarily driven by what we call ‘gut feel’. And that’s changing rapidly. Imagine a boardroom conversation, where the Vice President of Sales stands up and says “Look, you know, I believe we should do this” because of so-and-so; he or she is not going to get a push back from the subordinates saying “Let’s not just go with beliefs and guts, but also lets look at the data.” But the trend now is that decisions are being driven by insight garnered from mining data sets, as opposed to simply relying on instincts. This doesn’t mean that instinct or intuition doesn’t have a role at all – in fact, they do have a very important role. It’s just that the time when they play a role has changed. Earlier it used to be gut-driven completely, but now when you have data, people expecting companies to mine their data, look for insights, and then when you have interpreted those patterns or findings, that’s where creativity and intuition or gut feeling are seen to play a very important role. This is essentially what is driving businesses to adopt big data methods and analytics and see if they can make those improvements in their bottom line.”

AK: “So, on one side it is driven by the need to gain a competitive advantage, to be more realistic in your decision making. On the other side, it is these new technologies that are making this possible - remembering that the same problem has been in existence for years!”

AG: “Actually, what is happening now is that there is an infrastructure that is being created, such as Hadoop, which is enabling companies mine such massive data sets at a much more rapid pace. In other words, earlier, we had this data, but the reaction time of companies would be a month; now that can be a matter of days, or even a matter of hours. So the infrastructure underlying the collection of such massive data sets is being put in place by a number of companies, and one such example is ‘Hadoop’, which basically involves massive parallel processing of computers using a grid like structure.

AK: “And what industry sectors and in which functions within them, other than marketing, will big data have the most impact?”

AG: “One example and this is more US based, it’s from the public sector: the New York Police Department is piloting a big data scheme to predict crime. Essentially it involves an algorithm that predicts where crime is likely to take place based on mining hundreds of thousands of prior incidents based on location, time, people involved and so on. And when they are able to predict where a crime is likely to take place, they are going to be patrolling those particular areas more often. And in the pilot phase, we’ve seen a 12% decrease in property crimes, 26% decrease in burglary and these models are in fact working. Now that the pilot seems very successful, the Los Angeles Police Department is planning to kind of phase in a full-blown project, which would then spread across 150 cities in America. Every notable police department will deploy a similar algorithm. I like this example, because even though it’s not from the private sector, it is really meaningful in terms of societal impact.”

AK: “As far as big data is concerned, do you see from your research if it is going to impact consumer finance and retail banking?”

AG: “We haven’t seen any remarkable examples, but my understanding is that the insurance industry has gone up by mining a lot of data, to see at what point are people more likely to churn out, and what they see is people are most likely to churn out at the time the policy has to be renewed – and so if you can figure that out, then you can figure out some good incentives to prevent people from churning out; for example, a week or two before the policy expires, you send a non-trivial discount to incentivise renewal. A similar example that I’m seeing is with credit cards – in the banking space – in preventing credit card churn, especially with new technologies on mobile payments coming in, the credit card industry is facing a non-trivial amount of competition from them, at least in the US. So models and methods that better predict what is causing people to switch and at what point, would be immensely useful for banking and financial services.”

AK: “Other than technology costs, what are some of the constraints to the growth of big data applications? How do you see them being overcome?”

AG: “The most important constraint, I would say, is human capital. And the reason I say so is that, right now, the way the industry is working – we have more or less sort of arrived at a consensus that we need a variety of different scales for a person to work in this area, and as designations go, you know, it could be a data scientist, or it could be a business analytics specialist – there are a



(#) The calm in European financial markets is deceptive: underneath, the euro faces an existential threat. It confronts turbulent financial, economic, political and social headwinds, and the interplay between them is potentially fatal. What is economically sensible is not politically expedient and what is socially necessary does not add up in financial terms. Hence, the need for Germany, Europe's leading power, to take the mantle of responsible leader. Sony Kapoor Managing director, Re-Define and senior visiting fellow at London School of Economics, Extract from Economist Debates of June 26, 2013 http://www.economist.com/debate

(#) Regulations such as Basel III in Europe and Dodd-Frank's Volcker Rule in USA, coupled with revenue pressures, have led Wall Street banks to reduce their inventories of bonds. Regulations have constrained the dealer's ability to use its balance sheets to make markets in corporate bonds. Xtract

from Capital Markets outlook 2013 by Ivy Schmerken Editor at large at http://www.wallstreetandtech.com

(#) The more immediate requirement to launch a new Current Account Switching Service for UK retail bank customers and a mobile m-payments service in Q2 2014, is also mentioned in the new Payments Council Roadmap, alongside six longer-term options examining what style of ‘end state’ payments infrastructure model the UK should have in the third decade of the 21st century – be it a central clearing hub; centralised banking utility; distributed model; agency banking platform; scheme-based evolution, which doesn’t centralise everything but does give standardisation and connectivity; or a hybrid model. Xtract from ‘UK Payments Council Unveils Roadmap to the Future of Payments’ Jun 17, 2013 ‘gtNews’ - Expert Commentary on Global Treasury and Finance

couple of different names being thrown out there! What nobody seems to figure out is, what are the skill-sets required in a person who will work in this way? And that is partly because this job is not well defined. My understanding comes not only from the fact that I’m a professor in the NYU and I come across many students in my classroom, but because I also run a centre for Business Analytics at NYU, which makes me interact quite often with practitioners and folks like you from the industry.

What I hear is that people are essentially looking at these things:

1. In-depth understanding of statistics, very broadly defined that includes both predictive modelling for data mining and explanatory modelling for econometrics and so on.

2. Some expertise in programming, we are not talking about just Java or C++, but about some of the more recent programming languages involved in data analysis such as R and Python and Hyde and so on.

3. You need, essentially, data visualisation – what I mean by that is even before you start doing any modelling or analysis of the data, the person should have the skills to simply stare at the data set and make inferences based on what kind of questions we should be looking for. We need to identify the questions first before we actually dive in deep into the data, and so data visualisation can be very important.

4. Primarily, the core skill is domain expertise. If you include one person from banking and one from consumer marketing and expose them to the same patterns, it is very likely that they will come out with different interpretations of those patterns, and that is driven by each specific domain expertise.

So, I think the biggest constraint is in identifying an individual who can have all these four skills – obviously it is an incredibly difficult task. So right now, companies are looking for anybody who has at least two of these four, and hopefully, from an academic institution, our role is to view and churn out more graduates with all four skills. The good news is that a number of leading business schools are taking the initiative in starting a massive programme in business analytics, very very specifically targeted at equipping students with these four skills. And our expectation and hope is that in a year or two from now this demand-supply gap will be reduced and once this happens, a huge constraint will go away.”

AK: “Besides domain expertise, they would want people with very very high IQ to educate them in this business of big data applications – wouldn’t that be so?”

AG: “To some extent I think the first three skills are something that we can impart in the classroom. We can equip them with predictive modelling for data mining and explanatory modelling skills, we can equip them with programming skills - R and Python and also with Data Visualisation. But the main expertise is one of the hardest

From Europe



skills to impart; because that is something you carry with you, based on where you’re coming from – and domain expertise typically means that: if you have been working in Banking and Financial Services for a number of years, then you have a pretty good sense of the institutional details in that industry, and how different processes work, how people interact and the cultural dimension in each organization. So when you see data from that industry, you are likely to have an advantage over somebody who comes from CPG, because they are not going to have the same depth of institutional knowledge that we do. So that’s where domain expertise plays a very important role.”

AK: “So you are saying it would be easier to educate people with good domain expertise, in the first three areas, than to educate freshers?”

AG: “Not typically educate, but it would be valuable for a person having those three skills to also have relevant domain expertise before he or she decides to go into a certain industry. If you have been working in Banking and Financial Services, and you come back for let’s say a Master’s Programme in Business Analytics, where you are trained in statistics programming and data visualisation, then when you go back to Banking and Financial Services that is a pretty strong edge to have, as opposed to somebody who goes to a completely different industry. Because the second person is very likely to not have the same level of domain expertise! He or she may have come from advertising, or from manufacturing.”

AK: “Lastly, Dr. Ghosh, this is quite tangential – could you say in a few words, something about crowd funding, about its growth and impact on government and society?”

AG: “Sure. I have been working a lot of late in crowd funding with a number of companies over here. The largest of them is called Indiegogo, which is globally the largest crowd funding platform. The basic idea is that, in the traditional world, entrepreneurs would have to go to venture capitalists and angel investors for potential seed funding. We see that angel investors form a very closed old-boys network. it is based entirely on who knows whom, and so many small or relatively unknown entrepreneurs would get shut off from the market because they are not well connected with the network of VCs. So then came in the phenomenon of crowd funding, which basically means that you harness the wisdom and

the funding of the crowds to fund a certain idea, a project, or a product. The core idea behind this is that, let’s say you have a great idea but you don’t have the resources to go ahead and produce it, or launch it; then float the idea on a platform like Indiegogo, in the hope that the average person out there are willing to support you. And so this person would throw in a few dollars, and this would start a cascade where other people would see few people throwing in dollars, then they would jump in, and then eventually – if the idea has merit – this can generate a non-trivial fund of money. So that’s what crowd funding is, basically relying on the resources of the crowd; complete strangers, people we don’t even know, to fund your entrepreneurial project or idea.”

AK: “Simplistically: would you say that Obama’s first election campaign was run on crowd funding?”

AG: “Yes to some extent. I mean, that is a kind of crowd funding - an atypical example. Most of the projects that we have seen involve, let’s say you have an idea for producing a movie – a documentary movie or an idea for writing a book, or for producing a new kind of watch. One of the most successful crowd funding stories was the Pebble watch. So it can be a product or even a small company. And one of the interesting things that is going to happen is, recently, the Obama government has allowed in the US to have equity based crowd funding, which means that people who are going to be donating to a certain campaign, they’re going to get equity – actual equities from the company they fund. Presently, the incentive for the people who donate money is pure altruism or some nominal reward out of it, but there is no equity involved. But a few months down the line, the law has been passed, and so we are going to see the emergence of equities in crowd funding. If I put in some money, I am going to get some shares of that company – almost like a kind of substitute for the stock market. So those are some of the types of crowd funded projects that we could see – although politicians should be able to use it for their own campaign, but those are atypical.”



(#) In 1885 cash from more than 120,000 Americans helped New York build the pedestal for the Statue of Liberty (Joseph Pulitzer, a newspaperman, led the whip-round). Today, as online crowdfunding matures, its advocates are becoming more ambitious. Three designers want to float the +Pool, an open-air swimming bath in New York’s East River, with clever filters to purify its murky water. In 2011 its creators raised $40,000 from Kickstarter users in just six days; in June they will ask for $250,000 more. They hope crowdfunding will cover much of the project’s $15m price tag. Xtract from ‘Civic crowd-funding - Breaking ground’ The Economist May 18, 2013

(#) U.S. is lagging behind the rest of the world in making the upgrade to EMV enabled credit cards (Chip & PIN). Presently 45% of the cards and 76% of payment terminals worldwide are EMV enabled. June 25, 2013 Read more at http://www.business2community.com/infographics/emv-coming - t o - yo u r - wa l l e t - i n - 2 0 1 5 - i n fo g r a p h i c - 0 5 3 2 8 4 3 # QWs0r4l3ECvsRWzx.99

(#) Telematics has the potential to bring revolutionary change to all aspects of the automobile insurance business. It enables insurers to monitor vehicle driving behavior and communicate back to the insurer with extremely rich and detailed data. Early adopters are reaping significant benefits from this wave of change. Europe has made leading steps in terms of adopting Telematics as an instrument for effective underwriting of their automobile insurance. Underwriters now are able to get the following benefits a) Usage Based Insurance (UBI), b) Driving pattern analysis, c) Real-time first notice of loss (FNOL, d) Effective roadside assistance and e)Stolen vehicle location -- Source; discussions at FST Media- The Future of Insurance between 14th and 15th March 2013 at Sydney, Australia and at the ACORD LOMA Conference between 6th to 8th May 2013 at Las Vegas, USA

A seasoned doctor could diagnose a patient by relying on some observations and a few questions. Only relevant laboratory tests may be required to confirm the diagnosis and not all the tests available in the list published by the lab. Could the same be said of ‘Software Testers?’ Yes, experienced testers could identify defect prone areas by gathering a few vital inputs, without having to visit the entire application. Intuition born out of in-depth domain knowledge and considerable experience with the relevant application makes this possible.

Is there anything to be gained by identifying defect prone areas in advance? Yes, it saves time in cutting through the chaff to the heart of sensitive areas. This becomes critical when testing timelines are to be crunched, as is invariably the case!

Testing is never enough and it is difficult to draw a line on when and where to end such processes. They become significant when schedules are crunched due to several factors, such as

• Late delivery of the system • Phased delivery of code • Lack of readiness of the environment/interfaces • Data migration issues

In the Software Development Life Cycle (SDLC), when it is crunch time, the ‘Testing’ phase is what absorbs the delays caused by other phases. But then again, ‘Testing’ is the last chance to uncover any defects or shortcomings in the system.

The challenge is to use the crunched window efficiently and effectively. Towards this, are there ways to ensure that the most critical areas are tested adequately in the shortest possible time after due prioritization? Is there a scientific way or is it to be purely intuitive? The ‘Pareto Principle’ could be the answer. ‘Doing more with less’ and contrasting the ‘Vital Few against the Trivial Many’

From USA

Meera KrishnanCards Practice Lead and Vice President (Delivery Services) Thinksoft Global Services

Early detection of viral worms -Defect Prediction Techniques



80%RESULTS

20% EFFORT

(#) Whether Big Data — that label for technology and decision-making that is upending so many businesses — can truly transform the industry that helped spawn it remains to be seen! Few deny that crunching data is increasingly important. But some insist that those old intangibles, like instinct and luck, are still paramount. Extract from ‘Google Ventures Stresses Science of Deal, Not Art of the Deal’ By Claire Cain Miller in NYT, June 23, 2013

(#) Cloud based solution for Treasury – Key IT security considerations. Software-as-a-service (SaaS) as a cost effective solution delivers high value services for end user organizations. However IT security in the cloud environment remains key concern for the treasury users. Alexander Grux on June 5, 2013 in www.kyriba.com

(#) The total Big Data market reached $11.4 billion in 2012 and is projected to reach $18.1 billion in 2013, an annual growth of

61%. This puts it on pace to exceed $47 billion by 2017. That translates to a 31% compound annual growth rate over the five year period 2012-2017. The growth rate of Big Data revenue in 2012 was due to a number of factors, including: (1) An increased awareness of the benefits of Big Data as applied to industries most notably financial services, pharmaceuticals, and retail; (2) The maturation of Big Data software such as Hadoop, NoSQL data stores, in-memory analytic engines, and massively parallel processing analytic databases; (3) Increasingly sophisticated professional services practices (4) Increased investment in Big Data infrastructure by massive Web properties – most notably Google, Facebook, and Amazon – and government agencies for intelligence and counter-terrorism purposes. Xtracts from update of Big Data Vendor Revenue and Market Forecast 2012-2017 By Jeff Kelly in the April 17, 2013 - http://wikibon.org and xtracts from Forbes May 31, 2013

Pareto says that if 20% of efforts are directed to the right areas almost 80% of the results could be achieved. This finding is context independent. The question that remains is how to identify the right areas? Where are they to be found; in the beginning, end, middle or all jumbled up?

The art and science of zeroing in on the right areas is called the ‘Defect Prediction Technique’ aka ‘Risk Based Testing’ (RBT).

This helps arrive at an optimal coverage/framework to prioritize testing based on information relating to the business, past trends in performance of the application and the testing complexity.

‘Risk based testing’ (RBT), based on the above principle, speeds up the process of unearthing critical defects at a very early stage, thus providing enough time for rectification of the problem and re-testing the process. This ensures that all critical functionalities are adequately tested and the roll-out is devoid of any critical defects despite a compressed time schedule.

RBT is based on an optimally weighted combination of the Technical Perspective (TP) and the Business Perspectives (BP)

For example, in the credit card business, address printing in a card statement or intimation of change in credit limits may be a simple functionality and may not have a high score on technical complexity. However, as both are customer touch points, they carry a relatively high score on business criticality.

• Not receiving the monthly credit card statement is bad enough, but consider your receiving your boss’ statement and the boss coming to know about it. Though there is no financial loss, imagine the embarrassment and the reputational risk.

Technology and Markets

Technical PerspectiveNot considered

Both business criticality and likelihood of failure

considered through a structured, objective

framework to arrive at the right test composition

Business PerspectiveNot considered

Business PerspectiveConsidered

Business PerspectiveConsidered

Technical PerspectiveConsidered

Technical PerspectiveConsidered



• Unlikely though, take the case of a customer’s credit limit being lowered without advance intimation. Imagine his embarrassment when his card is refused for having exceeded the lowered limit. Both examples have a low impact on the technical perspective (LTP) and a high impact on the business perspective (HBP).

When dealing with Treasury and Capital Markets, capturing of settlement instructions properly in respect of payments to be made through third-party banks, ‘settlement-Instructions’ setup, ‘limits management’ and Know your Customer (KYC) compliance are functionalities that are moderate on technical complexity but very high on business criticality.

• Imagine a situation where a customer’s current address is not updated as per KYC norms and a new checkbook meant for him does not reach him because it is mailed (not hand delivered henceforth as per current policy) to his earlier address. This is a case that is moderate on technical perspective (MTP) and high on business perspective (HBP)!

In the insurance business, an error in the premium calculation logic would have a low impact on the technical perspective (LTP), as it could be easily corrected retrospectively from a programming perspective. But it could have a high impact on the business perspective (HBP) if the error results in over-recoveries through inflated EMIs, however small they may be, from the insurer and if she/he comes to know about it years later.

There could be some functionalities that are critical from both perspectives such as General Ledger (GL) reconciliations, interest calculations, fee calculations, real time exposure monitoring, user privileges and handling the information handshake routine between the core application and interfaces like sending chip related embosser information to the card embosser. They carry the highest risk rating; HTP and HBP and would carry the highest priority in mitigating the risks.

In practice the gradations across TP and BP are not just three; low, medium and high, but could be much wider and finer, ranging from TP1 at the lower end to perhaps as high as TP15 at the higher end. It is the same case with the business perspective! The weightages given to the TP attributes could also be different from those given to BP attributes and could vary from application to application and across time, depending on changes in the regulatory environment and market conditions. Hence the need for informed decision making in the risk prioritization process should be backed by the collective wisdom gained through years of data-flow,pattern recognition experience and in-depth domain knowledge - which in turn translates into intuition.

The factors that determine the value of the above two parameters may vary, based on:

• Testing Complexity

• Risk disposition of the client

• Maturity of the product/application

• Level of customization

• Initial roll-out or Upgrade/Release

• Product release or client specific release

• Business/operational areas impacted

• Defect history of the areas to be tested

A sample list of factors used to arrive at the risk score are:

Probability of Failure

• Changes in core application

• Interface related changes

• Testing complexity

• Past history of defects

Consequence of Failure

• Loss of revenue and / or increase in operational costs

• Loss of reputation

• Customer Service breakdowns

• Legal or regulatory impact

• Impact on Go-live date

Theories are well known in the industry; however their application often leaves much to be desired. Some tips to increase the effectiveness:

1. The risk score of each module could determine the code-delivery schedule, so that the most critical module is delivered, tested and made ready on priority.

2. The amount of regression testing to be done can be determined by the risk rating

3. The test execution plan can be drawn based on the RPM , so that high risk functionalities are tested first

4. More importantly, if the progress of testing is reported based on the order of the risk scores of the functionalities, then it helps to determine the health of the application more than going merely by the volume of tests completed.

A diligent approach to risk based testing could bring up to 50% savings in time, money and effort. This is illustrated in the Case Study below. By executing only 53% of the planned test cases, 100% of Priority-1 defects and 95% of Priority - 2 defects were unearthed.



“You know more of a road by having traveled it than by all the conjectures and descriptions in the world” William Hazlitt

Particulars

Test ExecutionStatus

Count Count% %

Total Scripts Executed

Defects

7253 3809100% 53%

216 155100% 72%

P1 9 9100% 100%

P2 128 121100% 95%

P3 & P4 79 25100% 32%

ComprehensiveTesting (A)

RPM BasedTesting (B)

I. In 1157, which one of the following institutions issued the earliest known bond to finance the war with Constantinople?

a. Central Bank of Armenia b. The Dutch East India Company c. Bank of Luxemburg d. Bank of Venice

2. The European Economic Community was established in 1957 by the Treaty of Rome. How many countries constituted the original community which is today the European Union?

a. Four b. Five c. Six d. Seven

3. As of 2011, which one amongst the following countries had the highest number of commercial bank branches per 1000,000 adults?

a. Brazil b. China c. India d. USA

4. In which one of these African countries would you find the only cashless Coca Cola Company?

a. Angola b. Cameroon c. Kenya d. Sudan

5. In a recent computation of financial inclusion in 632 districts across India by the rating agency CRISIL, which one of the following states had the highest financial inclusion?

a. Bihar b. Maharashtra c. Manipur d. Pondicherry 6. Which of the following statements would you associate with Crony Capitalism?

a. Habitual under invoicing b. Dishonoring Letters of Credit c. Awarding contracts to family and friends d. Taxing the poor more than the rich

7. Which one of the following is not a mobile payment technique?

a. Clinkle b. Dial-up c. LevelUp d. Square Wallet

Quiz for Meghaduta July 2013

Answers to the Meghaduta Quiz of April 2013

1. During 2012 amongst the 5 countries listed Ireland had a current account surplus; 2. The discovery of the theory of probability is associated with Blaise Pascal, 3. The approximate per capita income in India during 2012-13 was Rs 5700, 4. The word ‘Bank’ has been derived from the French for Bench (Banc)5. In 2010, the GDP of USA was eight times larger than of India.6. The 2022 Soccer World Cup would be a major infrastructure growth-driver of the region, especially Qatar. 7. ‘Ease of Recharge’ was a major contributor to the success of the mobile wallet M-Pesa in Kenya

Please click here http://thinksoftglobal.com/meghaduta/index.php to take the quiz

Note: Register and tick or enter the answer in the assigned box. Seven entries with best responses will be chosen as per a lottery draw and USD 100 will be donated to the chosen charity of each winner. Last date for responses - 30th Sep, 2013. Winners will be communicated by email.

Case Study: Comprehensive Vs RPM BasedTesting

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