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Software testing: the next big thing in IT outsourcing

Software testing: the next big thing in IT outsourcing
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First Published: Tue, Apr 24 2007. 01 00 AM IST
Updated: Tue, Apr 24 2007. 01 00 AM IST
Software testing, long seen as a poor cousin of application development and maintenance in India, has carved out a fast-expanding niche for itself in the outsourced tech services industry, and is estimated to top $500 million (Rs2,100 crore) in terms of revenue this financial year. Software testing is the process of checking the application at every stage to weed out glitches or bugs.
As Citigroup NA, Perot Systems Corp. and other customers discover the value in outsourcing testing—fixing a bug becomes more expensive at every stage of development, from five times while coding to as much as 200 times at the final cut—they are increasingly reaching out to tech service vendors in India.
“We are the gatekeepers; we decide if the product is ready to go or not,” said Sumitra Gomatam, who heads the testing division for Cognizant Technology Solutions Inc., a New Jersey, US-headed software services firm with most of its operations based in India.
And it's not just tech majors Tata Consultancy Services Ltd (TCS), Infosys Technologies Ltd and peers that have been quick to capitalize on the demand. Specialist testing firms such as AppLabs Technologies Pvt. Ltd, Maveric Systems Ltd and ReadyTestGo Pvt. Ltd have also entered the arena.
All the players are fast ramping up their teams to meet the growing demand. Cognizant, for example, has grown ten-fold in terms of headcount over the last three years. “In the first quarter of 2004, we had less than 500 people in testing; in the first quarter of this year (2007), we are more than 5,000,” said Gomatam.
Infosys says testing services contribute to 7.3% of its revenue in its latest quarter—the Bangalore software bellwether made Rs13,893 crore sales for the financial year ended 31 March 2007—up from 5.8% three years ago. At TCS, testing contributes 3% of its Rs18,685 revenue (2006-07), and it has 3,500 testers on its rolls.
And the outlook is bright, say industry insiders. “If software development revenues are growing by about 15% a year, then I can confidently say that the testing business is growing by more than 50% every year in India,” said N.N. Subramanian, director and co-founder, Maveric Systems, a Chennai testing firm.
The market will continue to expand as more companies recognize the advantage of having testing done by an objective third party, said Harmendra Gandhi, an analyst with Brics Securities. “Typically, when designing software, about 30% of the time is spent on testing, and with a shortage of software developers in countries such as the US, it makes sense to offshore that process,” said Gandhi.
Having said that, Indian firms provide services that go beyond just checking for bugs. They provide consultancy on the development process, as well as look at how the technology can be improved in order to increase efficiency. Applabs, a 1,600-hand independent tester, offers certification services too, says founder-chairman Sashi Reddi.
“In last few years, we have evolved from testing applications to become trusted quality assurance advisors to many of our clients offering high-skill services like process consulting, QA advisory, performance testing and test automation,” said Arun Ramu, who heads the independent validation services division for Infosys.
Such automation of some testing functions not only speeds up the process but also cuts down the cost because less people are required to do the work.“(We have had) increasing levels of test automation to automate regression testing so that customers are able to harvest greater return on investment for every dollar spent,” said Satish K. Thiagarajan, global head of the assurance services division at TCS.
Regression testing refers to checking for glitches every time software is updated.
Going forward, large vendors will likely have an advantage over stand-alone testing companies. Not only do the big firms have understanding of domains, since they already offer other tech services in different industries, they also have the advantage to “cross-sell” services to clients.
“The question you have to ask is, what differentiation can you offer as a stand-alone company,” said Gandhi of Brics Securities. Independent firms need to develop tools and unique work processes and increase automation to compete with larger rivals that offer testing as a part of a larger suite of services, he said.
Applabs’ Reddi disagrees, saying independent testing players bring focus and expertise as well as scale to the table. Proof: Applabs’ ambitious expansion includes a $37-million acquisition it concluded last September of British tech and business solutions company IS Integration.
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First Published: Tue, Apr 24 2007. 01 00 AM IST
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