SaaS Models Taking Hold in IT Testing

Selling software solutions to IT departments of enterprises has traditionally been a long, complex process. Customers could often only derive value from solutions that involved integration and an extensive training process. However, SaaS models and the cloud are changing all of this. Now products for both development and IT operations organizations are available as a service or as a simple download over the Internet. These solutions require little or no training or integration, are simple and intuitive to use and deliver value immediately.

We have seen evidence of increased cloud utilization in areas of the enterprise such as HRM and SFA, but one sector that is producing a number of strong solutions that are quickly gaining traction is application testing. Research firm IDC estimates that standalone global testing services spending will grow to more than $19 billion over the next four years with a CAGR of over 15%, driven by the continuing shift to the cloud and rapid expansion of ever more capable mobile devices.

It is expected that internal IT or R&D engineering teams will increasingly look to utilize cloud-capable third parties companies for their test environments. Companies such as LoadStorm, which allows customers to accurately determine how user volume affects the performance of their Web applications quickly, offer flexibility and are more cost effective in the short and long term. By leveraging the cloud, customers can also scale the number of simulated users to very large numbers easily. This approach speeds up the testing process and also makes it available and affordable to a much broader set of customers than traditional approaches.

As cloud architectures mature and adoption increases, we expect to see this approach to solving IT problems continue to grow and expand. There have been a handful of acquisitions in this area over the past year and if the past month is any indication (three deals have been announced since the end of June), deal pace is not slowing. Buyers in this area, such as IBM, CA Technologies and HP, are expected to remain active and should continue to pay healthy premiums for sought after cloud testing innovators.

Recent Application Testing Transactions
recent application testing transactions

(click image to enlarge)

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