Allocating Your QA Budget Effectively

In the days when Waterfall methodology was followed, investment in quality was a necessary evil. IT organizations tried to save as much money for design & development, and QA got whatever was left. Though this sounds dramatic, it wasn’t far from true in many places.

The advent of Agile development methodologies changed the picture. QA moved from the background to being part of the core thinking (and subsequently budget discussions) of software engineering.

Many engineering managers who plan & influence budgets have a keen eye on how the budget is split between the various software engineering disciplines.

This blog aims to guide organizations on efficiently leveraging their QA testing budgets to enhance product quality, streamline operations, and ultimately achieve higher customer satisfaction.

How Do Organizations Spend on QA?

A great idea or a painful necessity – this is where all IT projects start. The idea/necessity turns into a proposal for executive decision-makers. At this point, almost everyone uses a broad assumption of % splits for QA – anywhere between 10% to 50% depending on the initiative and the organization’s maturity (& focus on quality).

As per the Future of Quality Assurance Survey by LambdaTest, the distribution of IT budgets towards QA varies wildly between different organizations.

The data shows a clear trend that larger organizations spend more on QA than medium & smaller organizations. While the smaller organizations would still value QA highly, their limitations on what to spend their money on is a different challenge.

This trend suggests a scaling of investment in QA that correlates with the size and, implicitly, the operational complexities and risk profiles of the organizations.

The larger story here is that measuring how much to allocate for QA doesn’t seem to have a clear pattern. Let’s address that in the next section.

Challenges of QA Budget Allocation in Different Industries

Different industries have different quality expectations and compliance requirements that uniquely affect their QA needs. Let’s look at some examples:

• Finance: While a few bugs may not make a massive difference, a serious software problem in a financial services provider (a bank or payments organization) typically ends up on the news and will prompt conversations with the regulators. The services are considered critical for the normal functioning of societies, so quality does hold a critical role but is not the deciding factor when it comes to software development budgets.
• Healthcare: A bug is almost not an option. Incorrect data on a healthcare practitioner’s screen can be the difference between life and death. QA is at the center stage of software product development.
• Retail: User experience is essential (especially for online businesses), but the primary focus is catering to the most common scenarios. Usually, all edge cases are dealt with manually rather than catering to additional features/functionalities. The testing budget focuses on UX and performance rather than catering to the entire spectrum.
• Entertainment: The industry isn’t as regulated as healthcare or financial services, but the focus on user experience is much more intense. They also tend to be newer companies and don’t usually have the ‘legacy systems’ problem to worry about. They are also not as feature-heavy and invest in performance and UX when it comes to QA investments.

To summarize, no one size fits all, especially when it comes to QA investment decisions.

5 Tips to Manage Your QA Budgets Effectively

So, what can you do when you plan your QA budgets?

Here’s a short list for you to consider.

Take a long-term view of costs

Most organizations work on annual budgets. It makes sense. The financial world works with increments of quarterly and annual cycles. While it is practical, it doesn’t always help.

The annual cycles force decision-makers to take a short-term view. They are influenced by how much they can spend in the current financial year rather than having a long-term view. Investing in a new technology stack or QA tools can be complex, with the investment running over a couple of years and the performance/productivity improvements coming in a longer time range.

To learn more about it, you can refer to this blog on calculating your test automation ROI.

There is no obvious solution to this problem. Each organization has varying degrees of difficulty in convincing stakeholders to think long-term, especially in QA budgeting.

Let’s assume that your annual budget is X million dollars a year. Find a way to visualize why 2.5X million dollars committed over three years is better than 1X million dollars for three years with a separate decision cycle for each year.

My advice – try it! If it works, great! If not, you’ve tried and have a better starting point when the budget discussions start for the next year.

Think beyond QA (budgets)

Many organizations still have QA departments separated from the rest of other IT teams – infrastructure, application development/maintenance, etc. However, the software itself doesn’t have any boundaries.

If you cannot find more money, you can find ways to spend less (time=money) on what you do. Let me explain!

The product owners influence QA – if you have a robust QA process, a simple filter of bugs with root causes, such as missing requirements, incorrect requirements, etc., should give you an estimate. Influence your product owners/BAs to write better requirements, an even better idea is to co-evolve them.

The infrastructure teams influence QA spending. Look for all the bugs where infra issues were the root cause. Plus, add the downtimes of the QA environments – capacity issues, config issues, CI/CD tools downtime, etc., and You’ll get an estimate of how much time (converted into $) was spent on waiting time/downtime.

QA teams tend to pay for all of it. All the spending on waiting time, downtime, non-value-adding tasks, etc., is paid for by the QA investments. You can use this data to help your infra teams get bigger budgets so they can fix the root causes (& not simply purge/restart when systems hit a bottleneck point).

Imagine if your infra team has enough time & machine capacity to remove the top five root causes. How much time will you save? And how much of the time saved can you redirect as investments into innovation/upgrades on the QA process & tools?

What am I alluding to – find a consortium of partners that can bat for your case. Even if you do not get the money to spend yourself directly, find out other ways ‘other’ teams can help you reduce your wasteful spending.

If you are an engineering manager overseeing all the engineering functions, try to map the direct and indirect dependencies between the teams. Gently push your leaders to find a commonly agreeable version of the budget, forcing them to collaborate as the success of one team is necessary for the other.

Forget last year’s budget

Technology is moving at breakneck speed. What you invested last year may not work this year. What your organization intends to achieve this year may differ greatly from last year.

One of the most popular models for budgeting is X% over the previous year (X could be positive or negative depending on the company/year). With this model, QA organizations (& engineering teams in general) focus on the wrong questions – who can we keep this year, what licenses can we keep running, etc.,

While this is practical, it does take the focus away from ‘what do we want to achieve this year?’.

Convincing your stakeholders to have a different starting point for this financial planning is hard but is worth trying.

There is no guarantee that you’ll succeed, but you won’t know if you don’t try.

Challenge your status quo

You’ve done things a certain way so far. Great, it worked last year. But include a ‘questioning your reality’ in the budgeting process.

“We always automate every single test case” – ask why. The popular 80/20 rule suggests that you don’t need to.

”We automate only 25%” – ask why. Is it hard to automate the rest? Is the automation ‘code heavy”? Have you considered using generative AI to improve productivity?

”We have to QA approve every major & minor release” – ask why. Do you have enough evidence to prove that a heavy QA governance is needed?

I cannot cover every scenario, but I guess you get the hang of where this is going.

When you have that honest conversation with your team, you’ll better understand what specific areas within QA need the budget. It’ll also be quite handy when you go to the negotiation table with your stakeholders.

Align your QA strategy with your organization

We’ve seen from the survey that smaller organizations tend to spend a little less compared to their richer/larger counterparts. The reasoning is obvious, but risks always aren’t.

Smaller organizations need to focus on the product. They need to remain slim to be viable. They need the cash flow to survive and grow. Heavy investments in QA may not be right or necessary for them.

But what doesn’t become obvious is the risks associated with your QA testing strategy. What can fail will fail – especially with software (& hardware). It is only a matter of time before the point of failure is discovered in your systems. Your organization’s QA approach will influence who’ll find it and when.

• In an under invested QA organization: Your customers will probably find it first in production.
• In a heavily invested QA organization: Your QA teams will always find, and in the test environments.
• In an optimally invested QA organization: Your QA teams will always find the important issues first in the test environments. You expect some minor issues from edge cases to be discovered by your customers in production.

There is no good or bad with either of the above three scenarios. What you need is an alignment with your stakeholders. You cannot set expectations that you’ll never have defects leaking into production when you are significantly under-invested.

During the budgeting process, present scenarios of not just cost but also the risk profile for each of them. Explain the risk associated with each scenario. The cheapest option may be attractive, but is it worth risking a high chance of making your customers unhappy?

Ensure that your stakeholders understand that what they decide to spend on QA isn’t just an IT decision, it is directly linked to the product experience.

Ready to Streamline Your QA Processes?

The QA process includes various activities, including software testing, which ensures the quality of the software applications being tested. Software testing offers various advantages when performed over cloud-based platforms, including speeding up the testing process and providing cost-effective solutions for the QA teams. One such platform is LambdaTest.

LambdaTest offers a comprehensive suite of QA testing tools designed to help organizations of all sizes improve efficiency and deliver high-quality software. At its core, LambdaTest is an AI-based test orchestration and execution platform that allows you to perform QA automation at scale over 3000+ browsers and operating systems combination.

Wrapping Up

To wrap it up, let us agree that QA budgeting is far from a one-size-fits-all process. Every company has unique problems and needs to define & customize a QA approach before deciding on QA budgets.

But it is not necessarily bad. QA budgeting is not merely about how much to spend but about how to spend wisely. Embracing the complexity of QA budgeting as an opportunity for innovation and improvement is a better path than going down the traditional paths.

Ilam Padmanabhan

Ilam Padmanabhan is a seasoned Tech/Financial services expert with a history of delivering multi-million dollar global projects in various Delivery and QA roles. He frequently authors articles on his personal website where he explores the latest industry trends, cutting-edge technologies, and best practices for thriving in today’s rapidly evolving landscape.

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