LONDON, UK: According to a new report by global advisory and consulting firm Ovum, the worldwide market for software and systems testing services will reach over $56 billion in 2013.

Both the outsourced and in-house testing services markets will grow over the next four years but not at the heady rates seen over the last four years.

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Despite this slowing, testing services will grow at a compound annual growth rate (CAGR) of 9.5 percent from 2008 to 2013, faster than most other IT services.

Growth in outsourced testing services is outpacing that of in-house testing due to the greater cost savings, time-to-market and quality offered by outsourcers. According to the report, outsourcing currently accounts for 53 percent of the total worldwide testing services market. This will reach 58 percent in 2013.

The outsourced testing market is being driven by offshore delivery mainly from India which is quickly establishing itself as the home of outsourced testing. However, the rapid growth in the market has caused skill shortages around testing in India.

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“Indian testing services providers used to compete purely on price through labour arbitrage. That’s changing. They’re now climbing the value chain and offering the same capability as North American and European testers. Western testers that don’t offer significant offshore delivery will find it increasingly difficult to compete with India,” says Dr Alexander Simkin, a senior analyst within the IT Services practice at Ovum and author of the report.

“The Indian provision of outsourced testing is being dogged by skills shortages though. So we could see increasing numbers of testing services jobs going to other low cost territories such as China, Malaysia and north Africa,” he adds.

India remains the fastest growing centre for outsourced testing and quality assurance services, driven not just by Indian vendors but by onshore ones as well.

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All of the tier one IT services vendors with test services including IBM, Capgemini and HP-EDs have offshore testing capacity in India as do a growing number of onshore independent testers such as SQS. Whilst the scandal that hit Satyam in January 2009 threatens to dent market confidence in Indian System Integrators (SIs) and their test services in the near term, once the dust has settled from the Satyam debacle, it will be restored. It is possible that some existing Satyam contracts for testing services will be cancelled and awarded to competitors but to date, there is no evidence of this having happened.      

The worsening global economy will impact the worldwide market for testing services which will not be entirely shielded from reductions in end-users’ budgets. Still, testing will grow faster this year and next than most other IT services due to the cost efficiencies testing offers and the trend of testing ‘smarter’ that began before the credit crunch hit.