SAP testing will be one of the hottest areas of the €92bn global testing market in 2013, as SAP users look to speed up and improve the quality of upgrade and extension projects.

We’ve looked in previous blogs at the growing challenge and cost of effectively testing SAP platforms, but further evidence of the buzz around this market came this month with SAP testing tools specialist Panaya securing an additional $16m in venture funding.

The cash injection will partly come from the VC vehicle of SAP co-founder and Supervisory Board Chairman Hasso Plattner; other investors include Battery Ventures and Benchmark Capital. The funds will be used for product development as well as sales and marketing expansion: Panaya recently opened new offices in Germany, Japan and the US.

Panaya has been around since 2006, and is part of Israel’s vibrant community of testing tools and services vendors. Its main proposition is that it helps organizations slash time-consuming processes such as installing patches, correcting code and unit testing, and claims to have cut the upgrade project times for the likes of Renault by more than 50%.

It does this by using a Cloud environment to simulate the planned project and automatically identifying areas of potential vulnerability to help the client focus its testing activities – which can be performed using Panaya’s tools.

PAC believes that there is a big potential audience for Panaya’s offering, given that SAP managers are tasked with executing a growing number of projects to support M&A activity, global expansion and corporate restructuring programs.  Panaya’s sales force will need to be on the ball to ensure that it engages with clients at the earliest possible stage in their project cycles in order to get its foot in the door.

One of the challenges for small tools vendors looking to build relationships with large enterprise clients is to engage with the IT services suppliers that play an increasingly important role in running and shaping their clients’ applications landscapes. Panaya has made some good progress in this area in the last year, with CGI launching a Panaya practice last May and Steria announced in December that Panaya would be a key component in its new SAP RightTest service.

Another obstacle for Panaya is to convince buyers that it can deliver above and beyond what their existing test management suite can provide – and for the majority of SAP users, that will be HP Quality Center and the QTP for SAP automation tools. Competition will get stronger in this space, with Micro Focus’ Borland unit unleashing a SAP-oriented version of its Silk test automation suite in 2012. However Panaya does have a differentiator in its cloud-delivery model.

There are also a lot of companies out there – even large SAP shops – that simply don’t use test automation tools, and they will prove a tough sale. It will also be interesting to see if the company can replicate its momentum in the SAP space with its ongoing expansion into the Oracle ERP testing market.

But with a reference list that includes Coca-Cola, Mercedes-Benz and Unilever, and an expanding support network of services partners, Panaya has a solid platform on which to build in 2013. PAC also believes that it will become an increasingly attractive target for both HP and IBM – or even Micro Focus, which regained its appetite for acquisitions in 2012 – as they look to fill out both their testing tools propositions and SAP lifecycle management stories.