“The combined entity has a US $22mn revenue run rate. Our mission for 2015 is to emerge as the world’s largest and most respected Independent Testing Services company. This will require us to grow multifold in the next three years…”
Sriram Rajaram, Executive Vice President, Cigniti Tech, has spent the last 21 years in IT consulting, marketing, delivery management, project management and training. He has varied experience in handling large development projects, product development teams and quality assurance teams in IT services companies and software product companies. Sriram joined Cigniti in 2008 and repositioned the company as an Independent Software Testing services company. Prior to Cigniti, Sriram was COO at K7 Computing a software product company in the security space. Sriram joined Virtusa, an IT services company, in the year 2000 when it was 5 people and helped it grow to 1600 people in India. Before joining Virtusa, Sriram was the Head of Technology at Focus Infotech and Head of Curriculum Design at First Computers. Sriram is passionate about software quality and has been propounding the use of Defect Density to measure software quality through the development lifecycle.
Cigniti Technologies limited is India’s largest independent testing services company, headquartered in Irving, Texas. Through their Test consulting practice and IT services they define, optimize and align clients' business strategies with IT initiatives. Over the last seven years Cigniti has worked with companies in US and India to deliver quality software through a combination of onsite consulting and offshore delivery. Cigniti was featured in the Inc. 500 in 2009 as one of the fastest growing companies in the US. Cigniti specializes in Software Testing, Quality Assurance, Software Development, and is an Oracle and Microsoft Gold certified Partner.
Replying to Anil Mascarenhas of IIFL, Sriram Rajaram says, “The combined entity has a US $22mn revenue run rate. Our mission for 2015 is to emerge as the world’s largest and most respected Independent Testing Services company. This will require us to grow multifold in the next three years…”
Cigniti started as a transport and logistics company. Briefly walk us through how your company has evolved over the years.
Cigniti started as an IT Services company providing generic development services in 1998. In 2001, we developed products for the healthcare industry to address the HIPAA legislation and tried to market these products in the US. Due to the change in HIPAA legislation, the focus moved back to IT services in 2004. In 2008 we repositioned ourselves as an Independent Software Testing services company and have then since grown to become India’s largest independent software testing Services Company.
Give us a brief overview of the testing industry.
According to NASSCOM’s 2011 report on software testing, independent software testing is a niche that is growing faster than the overall IT services market. Globally $30bn worth of software testing was outsourced out of which India’s share was $3.2bn in 2010 and it is expected to grow by 2020 to $50bn with 55% market share for India. For India, $3.2bn to $26bn in 10 years makes software testing one of the fastest growing segments in the IT industry.
Testing as a career opportunity is not much heard of. Your thoughts on the same.
According to NASSCOM 2011 report on Software Testing, there are more than 65,000 professional testers in India. This number is expected to grow eight fold over the next 10 years. Testing as a career has started getting the attention it deserves and there are an increasing number of Software Testing conferences across India and around the world like STEPIN, STC, STAR Conferences, etc. which are testimony to the increasing focus on software quality. In many companies testers are treated on par with developers and in specialized testing companies like Cigniti, testers can be stars. Cigniti is working with engineering colleges and universities to educate and encourage software testing as a career opportunity and hopes to change the perception over the next few years.
How much does testing account for in the overall development cost?
Testing accounts for about 40% of the overall software development budget. This includes testing done by developers, testing done by independent testers and specialized types of testing that are becoming increasingly important in today’s world, like security testing, performance and load testing and mobile application testing. When 40% of the effort in spent in testing, specialists in testing can add a lot of value to improve the overall quality of software.
Who are the large players in India and globally. What is your USP?
Cigniti is India’s largest independent testing services company and globally there are independent players like SQS . Leading players like Infosys, Wipro and TCS have large testing practices. However our key differentiators are:
a) We are a specialist testing services organization that independently verifies our client’s software quality
b) We have built IP based tools and utilities that help speed up the testing process while improving the effectiveness of testing
c) Our test consulting service helps clients improve the quality of their testing processes.
d) Our specialized Test Labs for Automation, Performance and Mobile Apps helps test software without clients needing to invest in expensive testing infrastructure.
Brief us about your product Trace. Which are your other products and how much do they contribute to the revenue pie?
Our products are proprietary tools and utilities that help our clients speed up the software testing process. Our key products are cPerfTest, rMobiTest and Trace. Some products help in tracking test cases, logging defects and preparing test reports. Other products help reduce cost of performance testing significantly by leveraging the power of open source software. These products are not licensed to clients but revenues are included in the overall testing solution we provide to clients. We do not report a breakup of revenues for these products.
What are the growth drivers for this industry? What are the current trends here?
Software is running all aspects of a common man today. From our cars, mobiles, banks and credit cards, everything runs on software. And software defects can cause physical harm or mental agony at worst case or loss of time and money in simple cases. Such a situation demands quality software that works right. With so much new software being created every day, companies have to figure out a way to ensure software is tested faster and cheaper. They key business growth drivers for the industry are
a. Reduce risk of failure
b. Reduce costs of testing
c. Reduce time to market
d. Ensure security and compliance and
e. Improve quality
The key IT drivers for the industry are
a. Respond rapidly to business needs
b. New technology innovations like the Cloud, Web 2.0, etc.
c. Automated Testing
d. Faster test cycle time with tools and test frameworks
Explain to us your business model. What are your offerings and which segment do you cater to?
Cigniti works with Enterprises and Independent Software Vendors (aka Software Product Companies) to manage all their testing. We focus on working collaboratively with clients to manage their software quality while they can focus on key aspects like requirements, architecture, design and development. We use a global delivery model where our experienced test consultants help clients with requirements, test strategy, test plans, executing testing and preparing test reports to improve the quality of software being delivered. Cigniti has created multiple test labs like mobile testing lab, automation lab, performance testing labs, etc. to create complex test environments so that applications can be tested without huge investments in systems infrastructure. Cigniti leverages its products and tools to speed up testing while improving testing effectiveness.
Our key offerings are
a. Test Consulting Services
b. Mobile Application Testing
c. Test Automation
d. Performance Testing
e. Test Center of Excellence
We work with Enterprises in domains like BFSI (Banking, Financial Services and Insurance), Telecom, Travel, Healthcare and Retail to improve the quality of the applications they deploy. We also work with technology companies to improve the quality of their software products.
What is the entry barrier in this business?
Building capability in software testing takes time, delivery experience and investments into people, process and technology. While it is possible to physically replicate the test labs with large investments, the experience of having tested a variety of applications and the learning does not come easily. Our learning has not only been captured in our Test Methodology and Processes but also in tools which have been built over time to solve problems specific to domains and technologies. Our unique focus has helped us attract the best testing talent from some of the biggest brand names to Cigniti. Creating a brand takes time, vision and focus and not simply a matter of investing money. So I would say, the biggest entry barriers in this business are vision, focus and time – all equating to large investments needed to get to our position.
What are the significant changes that have taken place post the acquisition of Cigniti.
a) We have become India’s largest independent testing services company
b) Our presence in the US has grown stronger with our delivery center at Irving, Texas, US.
c) We have access to a large number of Enterprise clients in the US who work with Cigniti
d) We are moving to a new premises in Hyderabad that can accommodate 300 associates offshore and space for all our test labs
e) Our combined sales and delivery capability has helped us sign up with 12 new clients this quarter.
What is your domestic/international mix? How are the margins in this business in India and abroad?
85% of our business is from the US with about 5% from Europe and remaining 10% from Asia Pacific. Obviously the margins from India are lower than abroad, but serving Indian clients is important to us because we want to contribute to a stronger software quality culture in India. We believe in the coming years, India has the potential to become one of the major IT outsourcing markets of the world and our connect with the clients in India will stand us in good stead.
Which are the new geographies you are looking at?
We are looking at Europe and Latin Americas. We recently signed up with one of the largest Toy Manufacturers in the world, based in Europe. We also had two important wins in Latin America which should give us a toehold in Latam and help us grow our business there.
Brief us on your financials and what goals have you set for the coming years?
The combined entity has a US $22mn revenue run rate. Our mission for 2015 is to emerge as the world’s largest and most respected Independent Testing Services company. This will require us to grow multifold in the next three years, build our brand and develop capabilities in new technologies, new domains and new geographies. We are confident that we will get there through a combination of organic and inorganic growth.
What are the key initiatives you have taken that has changed the company?
a) Repositioning the organization into an independent testing services company
b) Using the inorganic route to grow revenues and expand across geographies
c) Investment into test labs for mobile application testing, performance testing and test automation
d) Creating an environment where innovation is encouraged
e) Focusing on creating value for all stakeholders like employees, shareholders, partners and community
What was the biggest challenge in for you? What are some of the important lessons learnt?
Moving at first gear in the first two years was tough. We had set a goal of being India’s largest independent testing company within a 3-4 year time frame in 2008. Many times, this looked like a daunting goal. Attracting the best testing talent and creating an environment where innovation is encouraged took the greatest effort and time. Another challenge was the merger of the two entities. The key lessons learnt during the journey has been
a. Dream big
b. Focus on the vision. There are lot of distractions but the eye should be on the goal
c. Patience is needed and you need to believe in yourself
d. Encourage people to innovate, create and think
In multiple areas China is compared with India. Any comparisons here?
China will be a serious competitor to India in another 10-15 years. The fundamental difference as far as software testing goes, is the common language and cultural affinity which is critical for testing. Software testing is all about communication, right from understanding requirements, logging defects to collaborating with developers. Right now China is building their English speaking capability and once they do they will compete with us on an even footing. However, I believe we have time to get ahead by investing in IP led software testing services that will differentiate us from others.
Give us your break-up from various segments.
80% of our revenues come from testing services while about 20% comes from development services. We do not report revenues segmented by domain at this point of time.
Tell us about your development center in Hyderabad. What are the products that usually roll out of here?
Our Global Delivery Center at Hyderabad is a modern center with various labs like Test Automation Lab, Robotic Software Test Lab, Performance Test Lab and a Mobile Test Lab. Our R&D lab works on various products like CperfTest, rMobiTest and Trace. These products are used by our testing teams to solve client problems and are not licensed products.
Your view on Opensource and to what extent has it benefitted you?
We have built significant capabilities in using open source software to solve client problems, especially in the performance and test automation space. We are also pushing our support departments to use open source software on their desktops to reduce the overall IT costs. Open source software provides an opportunity to technical teams to dig deep into the code to figure out the why and how of things and this helps them become better engineers who can identify and solve problems.
What is your staff strength? Do you hire from B-Schools? What advice would you give B-Schools and B-school students?
We have more than 500 associates across the world. We hire from B-Schools especially in functions like Marketing, Sales and Business Analysis. We end up training even B-School students for a period of 3 months before they can start contributing. I would advise B-School students to follow their passion and work in companies that give them an opportunity to do what they like. Too often they are focused only on the money and not what they want to do with their life. They start out thinking “I will follow my passion after I have made money” but once you get on the roller coaster of life most times you cannot get off. We are particular that B-School graduates who join us have a passion for IT and want to make a difference to what we believe will in the future become a fundamental right - The right to good software.
Your message to anyone wishing to join your company?
Cigniti is a great place to work with operational freedom, lots of fun and chance to innovate. We believe that Cigniti is helping build a better world because software runs everything. Defects and bad software cause headaches, pain and suffering. And at Cigniti we are the warriors who are fighting the good battle, every day, against defects and bad software.
Is the billing usually done in US dollars? Any hedging mechanisms?
Most of our Billing is in USD and we do not use any hedging mechanisms right now for our revenues.
Any new verticals you plan to enter?
At this point of time we are consolidating our presence in the BFSI, Telecom, Travel and Technology verticals. With a few recent wins in the healthcare and retail space, we hope to grow these verticals in the next couple of years as well.
What is the shareholding pattern of the company?
Promoter group holdings will increase to about 63% post open offer. The rest is with the public and employees. We expect to complete the open offer by end of March 2012.
You have been with Virtusa in the early years. What are some of the commonalities and differences you find now working in Cigniti?
Both experiences have been wonderful and I am fortunate to be associated with these companies. Both have been great learning experiences. Cigniti being a listed company when I joined, has also taught me to focus on shareholder value apart from creating value for clients, employees and partners. At Cigniti, participating in M&A strengthened my understanding of valuations, open offers, shareholding patterns, etc. There is a difference between working in a technocrat owned organization like Virtusa and entrepreneur owned organization like Cigniti. Once the entrepreneurs share the vision and repose their confidence in you, they give you a fully free hand and are willing to back you fully to achieve the vision. At Cigniti, Mr. Subramanyam (Chairman) and Sudhakar Pennam (CEO) share our common vision and believe in the team.
Comment on your CSR activities.
At Cigniti we take Corporate Social Responsibility seriously and are engaging with an NGO called Project 511 to improve educational amenities and standards in Government run schools in Hyderabad. We have started an in-house project hoping to make a significant impact on secondary school education across Hyderabad and AP in a phased manner. We are also engaging with Engineering colleges to spread awareness of software testing as a career and encourage fundamental research in software testing which is still rare in India. We just don’t want to be the biggest software testing company in the world. We want to be respected as well - by peers, clients, talent and the software community.
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