AppLabs looks at Chinese acquisitions

AppLabs looks at Chinese acquisitions

Hyderabad: One of the world’s largest independent software testing companies with revenues of $100 million (Rs395 crore), AppLabs Inc., says it is looking at acquisition targets in China and eastern Europe.

The Philadelphia-based AppLabs has a global engineering centre at Hyderabad. The firm currently has around 2,000 employees, of whom 1,600 are in India and the rest are spread over the US and the UK.

“(The) idea behind acquisitions in China and Eastern Europe is mainly to gain access to new verticals, new customers and new markets with high growth potential," says AppLabs president and chief operating officer Makarand Teje.

AppLabs had earlier acquired two firms in the UK: IS Integration for $37 million in September 2006 and KeyLabs for $7 million in April 2005. In China and eastern Europe, it is looking at acquiring testing firms that offer specialized services in areas such as life sciences.

“We are keen to acquire companies in these markets with established presence and customer base. In case we are not successful in zeroing in on suitable companies, we will go through organic route," Teje adds.

The company, which raised $17 million funds from global venture capital (VC) funds such as Sequoia Capital and Silicon Valley Bank for earlier buyouts, is considering tapping the Indian capital market for funding its growth.

“We have not yet firmed up our plans of an initial public offering (IPO), which would also give an exit route to the VC funds invested in us. We will freeze our IPO plans sometime in April," Teje says.

Software testing is one of the fastest growing segments in the IT services industry. While software services is growing at about 10-12% on an average, testing is growing at 50% a year, says market research and forecasting firm Gartner Inc.

Gartner estimates the size of the global software testing market at $13 billion and the global market for outsourced testing services at $6.1 billion. It expects India to corner a 70% share of the outsourced testing market.

AppLabs, which counts American Airlines, Visa, Novell, HewlettPackard, Royal Bank of Scotland and SAP among its clients ended the year to March with revenues of $70 million.