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TCS and Infosys Report Strong Growth in their Testing Units in Q1 FY 2014

Infosys and TCS published recently their Q1 FY 2014 (calendar Q2) financials. The two companies provide as part of their financial reporting indications on their software testing activities. In detail, in Q1

  • TCS’s assurance services were up (a NelsonHall estimated) ~24% to ~$256m
  • Infosys testing revenues were up ~+14% to $165m.

The Q1 FY 2014 information is consistent with their Q4 FY 2013 (TCS: ~24%; Infosys +16%).

Infosys and TCS obviously have had somewhat different performance in their testing activities in calendar H1.

Yet, the two companies are giving the industry a clear signal that spending on software testing remains very healthy in calendar H1 2013 in spite of the macro-economic concerns and GDP slowdown. Spending is in line with H1 2012 performance, with a slight acceleration in growth (+4% for combined TCS and Infosys).

Interestingly, spending on software testing in 2013 is holding up much better than during the subprime-time crisis of 2009, when testing revenues of the combined TCC, Infosys and Wipro had grown by ~+9% only

Looking ahead, the question is whether clients will keep on increasing their testing spending. Prices are under pressure and a number of services, including manual functional testing and automated testing are commoditized and offshored. Meanwhile volume is still up significantly. Growth rate in the industry is slowing down but it is unclear yet whether this slowdown is due to the macro-economic conditions or to the market reaching over time maturity.

Discussions with client suggest that new contracts still represent a majority of opportunities, as opposed to renewals of existing contracts. Client spending is therefore to keep on increasing in the short to mid-term.

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