Testing services company AppLabs has acquired IS Integration, a British software testing company, for $37 million in a move to gain access to the U.K. market for testing targeted at enterprise customers.
AppLabs uses an offshore model for the delivery of testing services to its customers, largely technology vendors in the United States. About 85% of the testing work is done from the company’s facilities in India, Sashi Reddi, founder and CEO of AppLabs, said on Wednesday.
By comparison, IS Integration delivers testing services from within the United Kingdom to customers in the country.
The combined entity is expected to generate $75 million in revenue and $8 million in profits by the end of its fiscal year, ending March 2007, Reddi said.
AppLabs’ customers include Cisco and SAP.
By acquiring IS Integration, AppLabs gains access to 30 enterprise customers in the United Kingdom. Some of these are large banks with operations or subsidiaries in the United States, which could potentially bring business for AppLabs in that country as well, Reddi said.
The acquisition will increase AppLabs’ workforce to around 1,500 employees, of whom 80 are in the Untied States, more than 1,100 in India and around 300 in the United Kingdom. The company plans to hire an additional 600 people by year-end.
Under the agreement between AppLabs and IS Integration, all staff in the U.K. company will continue to be employed. However, AppLabs plans to explore the option of offering services delivery from India to customers in the United Kingdom. Some of these customers are already outsourcing a part of their testing to Indian companies that already provide software development services to them.
As companies realize the benefit of separating software development from testing to get an independent validation of the work, some of the testing business now being transferred to Indian outsourcers will move to AppLabs’ operations in India, Reddi said.
AppLabs plans to use IS Integration’s operations in the United Kingdom as a base for expansion in the rest of Europe, Reddi said.
