Spotlight

High ambitions at AppLabs

AppLabs has successfully created a niche for itself in software testing, finds Vinita Gupta.

The software industry has succeeded in gaining a reputation for rushing buggy products to market. Deserved or undeserved, this label is sticking like glue, and that’s where specialised software testing companies come into the picture. As usual, some Indian companies have latched on to this opportunity.

Today, the global testing market is estimated to be a $13 billion industry. According to IDC statistics, testing in India is a $2 billion industry which is expected to touch $8 billion by 2008.

AppLabs Technologies is one of the Indian specialists in software testing. Although the company is just five years old (founded in 2001), it has testing facilities in Lindon, Utah and Hyderabad.

"The next wave of growth in testing will come as a result of growing adoption of service oriented architecture applications" - Sashi Reddi Founder, Chairman & CEO AppLabs Technologies

Speaking on the software testing market, Sashi Reddi, Founder, Chairman and CEO of AppLabs says, “There is a lot of development in terms of technologies and project management, all of which have helped testing grow as a specialised discipline. Today, software product companies are seeing the benefits of getting their products tested by companies like ours, not only for cost savings but also to take advantage of an unbiased quality check.”

Inorganic growth

There are two mechanisms that a company can adopt to grow. One is to grow organically by building solutions and competencies; this is the slow-but-steady route in most cases. The other is to go inorganic by acquiring companies left, right and centre. If done right, this can be a highly effective strategy. AppLabs realised this early on and took the inorganic route; in April 2005 it acquired KeyLabs.

With this acquisition, AppLabs not only got its customer base that includes companies such as Sun Microsystems, HP, Novell and Cisco, but it also acquired an experienced team.

Remarks Reddi, “Acquiring KeyLabs gave us a head-start in certification services. KeyLabs’ strong reputation in the US as a performance and certification specialist helped us create a strong testing story.”

Reddi notes that KeyLabs brings a team of testing experts, as well as a quality assurance lab that ranks among the most advanced in North America, to complement AppLabs’ existing team and facility in Hyderabad. As a result, AppLabs now commands vaster resources.

With clients like Sun and Cisco, KeyLabs had the market-ready expertise. “The acquisition also helped us leverage KeyLabs’ infrastructure to offer a flexible engagement model,” adds Reddi.

Overnight success … almost

It would be fair to say that AppLabs has emerged as one of the top testing companies in India in a short span of time.

“Since its inception, AppLabs has been doubling its revenues year-on-year. Currently we are servicing 70-75 active customers, some of them leaders in the IT space. As we continue towards our goals we will also scale up our engineering capabilities both in terms of expertise and technology,” comments Reddi. “Though we had the first-mover advantage working for us, we had to deal with a host of challenges in terms of acquiring and training manpower, and taking responsibility for an unexplored territory. As the projects kept coming, we could leverage our engagement models to mitigate such risks.”

Among the many milestones and achievements that AppLabs has garnered in such a short span, their association with TRUSTe—a leading independent trust authority in the US—is the most prestigious one. This is the first time TRUSTe has taken help from outside technology experts to qualify applicants for the company’s privacy programmes. States Reddi: “This is a huge project for us. We are also testing certain platforms for the American Stock Exchange and Bombay Stock Exchange.”

AppLabs testing services consists of three primary offering to help enterprises and independent hardware and software vendors improve quality throughout the development lifecycle. These are quality assurance, development services and certification services.

Quality Assurance (QA) services support verification and testing of hardware and software. This includes functional white-box compatibility and performance testing on enterprise applications or software products, compatibility and performance testing on hardware devices, test automation to enable efficient test execution, augmenting QA staff for peak loads, and consulting for quality management process re-engineering.

The development services involve helping its clients to jumpstart software product development, customise applications and support ongoing maintenance. AppLabs provides expertise in building Internet, client/server and wireless applications, as well as delivering migration, integration and internationalisation services.

KeyLabs’ certification services include some of the industry’s most prestigious certification programmes serving ISVs, hardware vendors and others such as Cisco, Novell, Sun and RealNetworks, and specialised certification for Linux and Microsoft Pre-Testing.

As evidence of its commitment to process and quality, AppLabs has achieved some key industry laurels, including CMMI Level 5, ISO 9001-2000 and BS 7799.

Some of AppLabs partners include AT&T, Cisco, HP, IBM and Sun. “Our partnership with these companies gives us access to the skills, tools and training that are required for us to design and deliver the right solution that meets each customer’s exact requirements,” says Reddi.

AppLabs has served over 400 customers over time, including Airgas, American Airlines, HP, InstallShield, MSNBC, RiverDeep and SAP. Some companies such as HP, Cisco and Novell are its customers as well as partners. For instance, HP’s All-In-One printers are certified at AppLabs, but at the same time the certification service that the latter provides has HP as its partner. It has a similar relationship with Cisco.

“We have also been innovative in the way we deliver our services to each of our customers. The evolution of different Centres of Excellence—namely automation, performance, and security—have helped us in adapting the delivery model. As we move further on the path to becoming one of the top testing players in the world, we hope to offer a breadth of services and depth of expertise that is unmatched,” adds Reddi.

Whether it is the services segment or the OPD segment, Indian companies have been successfully creating a niche for themselves. The same is predicted for the software testing market. According to Gartner, the worldwide software testing market is about $13 billion, and the global market for outsourced testing services is around $ 6.1 billion. India is expected to corner 70 percent of the outsourced testing market.

Companies such as AppLabs enjoy a first-mover advantage, and are benefiting from the acceptance of outsourced testing by IT giants, coupled with factors such as the growth of the Service Oriented Architecture (SOA) application market, as well as security and performance testing.

Reddi believes that Indian vendors are winning more deals due to the finesse that they have developed in IT services in terms of process frameworks, domain knowledge and testing techniques. “More than 50 percent of SEI CMM Level 5 companies are located in India, so enterprises abroad are comfortable outsourcing to India rather than any other country,” he explains.

He feels that the next wave of growth in testing will come from increased adoption of SOA. Reddi adds, “SOA applications need testing for functionality, inter-operability, security, performance and other non-functional aspects of the composite applications.”

Over 80 percent of the business applications sold between 2005 and 2008 will be based on the principles of SOA. IDC forecasts that worldwide spending on SOA-based external services will reach $8.6 billion in 2006, growing 138 percent to increase from $3.6 billion in 2005. IDC predicts that global SOA-based services spending will touch $33.8 billion by 2010.

Up next: wireless and gaming

AppLabs efforts in performance and security testing have paid off well, both in terms of the client profile and the expertise it has built. Moving forward, it intends to replicate this success in the wireless and game testing markets. In the next 12 to 18 months, the company plans to strengthen its offerings in these two service lines.

To make its mark in these two segments, the company plans to use recently announced funds from Sequoia Capital (to the extent of $17 million) for acquiring three companies, one each in India, the US and UK. Some funds would also be used in building a campus in Hyderabad.

The BFSI focus of the company would continue as it has been the key revenue driver for the global software industry. India’s IT export revenue from the BFSI vertical alone are projected to touch $10 billion by 2006, as against a mere $3.32 billion in 2003 (Source: Nasscom), and hence Reddi believes that from an IT standpoint, BFSI needs strong domain as well as technical expertise.

Concludes Reddi, “We are ramping up our efforts to further make inroads into the BFSI segment. In the next two years we expect BFSI to account for a considerable part of our revenue as we continue towards our goal to become the number one software testing company globally.”