The world of independent testing has seen significant change in recent years.
As we’ve highlighted in previous blogs, Germany’s SQS emerged as the “last man standing” in terms of independent test service suppliers of any significant scale, as the supplier community polarized into large generalists and small boutiques.
But a new kid on the block is staking a claim in this middle ground, with Israel’s Qualitest embarking on a major growth program that has seen it make three quick-fire acquisitions in Europe.
In October it swooped for UK-based TCL, a 130-strong testing outfit with an offshore delivery capability in Bangalore and a strong presence in the telecoms sector with clients including Everything Everywhere. It also made two takeovers in the Netherlands last year, snapping up local players Four Oaks and Plusfort, all for undisclosed sums.
Qualitest has actually been around for some time, and has made its name running testing centers of excellence for large technology manufacturers including Microsoft and Intel. It is headed up by Ayal Zylberman, one of the best-known figures in Israel’s vibrant software testing community, and he has put together an experienced team to drive its European business, led by former SQS exec David Cotterell.
PAC caught up with Cotterell recently, who suggested that scale will be an important differentiator for Qualitest, as the recent acquisitions will enable it to offer the range of services and pricing that smaller boutiques cannot. The group currently has a total of 1,400 employees, which makes it the nearest specialist challenger to SQS, which has a headcount of 2,200.
Cotterell sees Qualitest’s potential market as those companies that understand the benefits of independent testing, and are looking for suppliers with the right cultural fit and level of domain expertise that can help them improve both testing quality and efficiency. While boutiques can help support specific projects, they do not have the skills availability or access to an international resource base to be able to support broader, multi-year engagements.
Independent testing isn’t for everyone. PAC’s latest figures show that 65% of total spending on external testing services is “embedded” in broader IT services engagements, and there can be benefits in terms of speed and integration of having a single provider doing both development and testing.
But the main proposition of independent testing is to ensure that the development team is not marking its own homework, and to drive a level of rigor in the quality assessment process that should help clients avoid high-profile systems failures suffered by the likes of RBS and the New York Stock Exchange in recent months.
There is clearly interest from buyers in the independent testing model. Earlier this month, Qualitest announced a $40m contract win with an unnamed bank to provide managed testing services. PAC is also aware of other deals signed in 2012 whose contract value tops $50m.
M&As have a history of mixed success in the testing services space. A high proportion of specialists are founder-led organizations that are hugely dependent on one or two key individuals to drive business, and company purchases can fail to deliver as those individuals move on. Crucially, Qualitest has appointed the founders of both TCL and Plusfort to senior local leadership positions.
PAC expects Qualitest to make further forays into continental Europe in the near future, with the Nordics one of the most attractive markets. Although Qualitest still lags SQS (whose sales topped €189m in its latest financial year) in size, it’s not far behind. And it is undoubtedly good for the market to have more than one serious player banging the drum for independent testing.