The Hindu Business Line : Scoring in the test

A META Group Study reveals that the testing business in India was $200 million in 2003-04. This is expected to be $700 million-$1 billion by the year 2007.

The Hyderabad-based VisualSoft Technologies recently called off its merger with AppLabs Technologies, a specialised software-testing company, on account of delays in obtaining approvals. VisualSoft was banking on AppLabs as a software-testing firm to provide a substantial revenue and margin push to its core business of outsourced product development.

In its financial projections for 2006-07, out of combined revenues of Rs 400 crore, VisualSoft had forecast revenues of Rs 220 crore from testing services, a growth of 140 per cent over the previous year.

But though this merger has fallen through, these numbers reflect the substantial potential of testing services in the overall growth of the software services sector.

And the failure of this merger plan should not detract from the likelihood of a slow and steady rise in the number of success stories in the software testing space.

Among the listed companies, Aztec Software's acquisition of the Pune-based Disha Technologies, an independent software-testing firm, in October 2004, has proved to be a successful story so far.

The testing opportunity

Software testing as a concept isn't new to Indian industries but with outsourcing opening up the shores to greater business opportunities, various companies, even those whose core business is not testing, are examining this latest trend with greater interest.

A Dataquest study in 2005 put the size of outsourced software testing globally at $6.1 billion of which $3 billion is offshored. About $1 billion of this is flowing to India.

Arindum Basu, Global Head Technology &Testing Services, Kanbay Software, explains, "As a process-driven specialised service, this is no more a low-risk business area, as it was perceived to be during the initial days of testing outsourcing.

Just as Kanbay has proven experience in specialised independent testing in BFSI (banking, financial services and insurance), there are many other companies offering specialised testing services."

Independent verification and test validation have become popular because of various reasons. "Legacy applications being extended on the Web; standards for testing emerging because of standardised tools in the market place such as Rational, Win Runner, Load Runner and Silk Test from the houses of IBM, Mercury and Segue; and product companies embracing third-party testing will see even greater emergence of this sector.

These trends have led to innovation in automated tools and frameworks for a robust product and expeditious time to market, open source tools, industrial testing and usability testing," believes G Sumitra, Director, Testing Practice, Cognizant.

Why outsource?

A META Group Study reveals that the testing business in India was $200 million in 2003-04 and this is expected to be $700 million-$1 billion by the year 2007. Certain basic factors propelling the market today include:

Customers increasingly perceive testing as an objective component to outsource and hence testing is often the first module to be outsourced.

With fixed IT budgets, outsourced testing to companies that treat testing as a separate competency allows the customer to ensure greater quality of the application before it is deployed. Outsourcing to vendors with domain knowledge and rich subject matter expertise not only ensures comprehensive functionality but also brings in business process improvements.

"From the Indian perspective, the cost differential as a significant driver of outsourcing is fading out now.

India boasts of having the largest number of certified professionals in Software Testing & Quality (like CSTE, CSQA, ISTQB). Many Indian organisations are allocating significant amounts towards skill enhancement of their staff. Impetus arranges for the expert training needs of each employee through its in-house dedicated training department also," says Praveen Kankariya, CEO, Impetus Technologies.

Burgeoning markets

From about 200 professionals in January 2004 to over 2,000 professionals in January 2006, Cognizant has seen a ten-fold increase in its number of career professionals, which is clearly indicative of the market opportunity waiting to be tapped. To start with, Cognizant's clients are the target segment for its testing services.

Companies such as Agitar Software are working towards making a niche in the code testing space and today develop products about software development quality, enabling customers to `develop faster and get the bugs out while they build code'.

For outsourced product development (OPD) companies, this has meant more business without significant altering of business models.

Dr Anand Deshpande, Chairman & Managing Director, Persistent Systems, says, "Our product development lifecycle is complete with software testing, which is a significant focus area. In such a case, an ISV (independent software vendor) can rely entirely on us for every aspect of product development and testing. An ISV would, for reasons of IP security and convenience, prefer to deal with one single OPD company, and not move different functions to different companies."

Echoing his thoughts, Gowri Subramanian, CEO, Aspire Systems, says, "Building a `well-engineered' product requires better skills than just building an application that needs to work. Product development is more of a `technical endeavour' as opposed to an application, which is essentially a business enterprise since technology plays a supporting role for applications.

Being a company focussing specifically on OPD, software testing is an important and a very integral area of our expertise. We know everything that there is to know about the product — its end users and the different environments it will work in."

Significant differences between Software Testing services and Product Testing have important implications. Deshpande explains, "Software Testing services are governed by the customer's product development strategy and processes.

Hence, the company offering services needs to put in extra efforts to bring about a change, if required. This results in a moderate level of involvement from the services company in terms of deciding the roadmap of the customer's product. On the contrary, a company that owns a product invests sufficient time and resources to outline the product testing strategy. This results in a high degree of ownership for the testing effort."

Emergence of specialists

Sreenivasa Pisupati, GM, Testing Services, Keane India, feels that the growth will mean an emergence of `specialist companies'.

An "increasing number of companies offer testing services. Companies specialise in testing for verticals such as ERP, banking and finance that focus on providing testing solutions only to these verticals.

These companies are responsible for incubating subject matter experts in this vertical, creating frameworks/solutions thathelp customers solve problems quicker/cheaper and for delivery of the projects to the customer," he says.

Spread over various verticals, the margins too are promising. "We find that the margins are comparable to application maintenance and development," comments Sumitra.

"Verticals such as financial services and telecom need specialised testing professionals who have worked in the domain.

Virtusa has traditionally enjoyed a high margin in our testing services primarily due to the global services model and our focus on services such as test automation, white box testing and performance testing.

Services such as functional testing enjoy below average margins while areas such as security testing and performance testing have higher margins," asserts Dr Santanu Paul, General Manager, Hyderabad Advanced Technology Centre, Virtusa.

The future too looks bright. Deshpande believes, "Software testing is riding on a high wave in both the domestic and international markets. Fortune 500 companies, the banking and financial services industry, insurance and ISVs are some of the main outsourcers of testing requirements. However, several large and medium-sized organisations in varied industries such as Healthcare, Pharmaceuticals and Logistics have also started to look at outsourcing of software testing. India has the potential to corner 70 per cent of the worldwide market in software testing. The Indian software testing companies can address the principal challenges of time, cost and quality. Moreover, more than 50 per cent of SEI-CMM level 5 companies are located in India, so MNCs will be more comfortable outsourcing to India than elsewhere."

Regulations such as Sarbanes-Oxley Act (SOX), Gramm-Leach Bliley Act, Health Insurance Portability and Accountability Act (HIPAA), and California Security Breach Information Act mandate that organisations enact stringent policies to safeguard paper and computer-based data.

"This phenomenon of corporate governance is paving the way for a new type of software testing — Software Compliance & Security Testing. All the industries affected by such regulations would require such compliance and security testing as an essential step for new technology incorporation," believes Kankariya.

Pointing to areas of growth, Kankariya says the consolidation of technology towards multimedia communication tools such as TiVo, IPTV, 3G (and probably 4G) phones, and other multi-utility communication devices is breeding a species of multimedia communication device testing experts.

Another trend that has emerged over the past few years is testing the conversion of Legacy Systems into the Web-based interface.

The travel and insurance domain, for example, is heavily dependant on Legacy mainframe applications. "Travel and Insurance service providers are Web-enabling their legacy applications and hence the need for testing the Web interfaces of legacy applications is growing."

Bala J. Raman, Co-founder and President, Congruent Solutions, warns, "There are areas we need to focus on in order to scale up — for example, training our people on automated testing. For most part, Indian companies do manual testing."

But that note of caution notwithstanding, it is obvious that the Indian tech sector is slowly but surely waking up to the rich potential of the software-testing space. Here's raising a toast to the drive ahead.

paromita@thehindu.co.in