Infosys - Software testing by Infosys Limited

IT Outsourcing Vendor Profile of:

Infosys - Software Testing 1.

Background .......................................................................................... 1

Revenue Summary .............................................................................. 1

Technology Vendor Clients.................................................................. 2

Enterprise Clients ................................................................................ 3

Delivery Capability ............................................................................. 13

Strengths and Challenges ................................................................. 14

Outlook .............................................................................................. 15

ÂŠ NelsonHall 2012

March 2012

IT Outsourcing: Infosys- Software Testing

Background In its fiscal year 2011, ending March 31, 2011, Infosys had revenues of $6.0bn and an operating margin of 29.4%. It is the second largest IT services vendor with headquarters in India.

• Fiscal Q1-Q3 2012 revenues were $5.2bn. Headcount at end of fiscal Q3 2012 was 145,000. Infosys‟ calendar year (CY) 2011 revenues were $6.8bn

• Infosys‟ guidance for full fiscal 2012 is a 16%+revenue growth (dollar terms) to $7.03bn Infosys provides testing services mostly through three units:

• Independent Validation Solutions, a software testing practice servicing enterprise clients

• Its newly-created Engineering Services business unit, which provides a set of services including mechanical engineering, electronics/hardware development, embedded systems, MES and production plant and PLM services and consulting. The unit has 8,000 engineers and represents ~3.2% of revenues (~$220m as estimated by NelsonHall)

• Its Mobility Practice, which focuses on mobile applications and device testing. The unit has 700 personnel.

Revenue Summary NelsonHall estimates that Infosys has derived ~$650m from testing services in CY 2011 of which ~$530m from IVS. IVS is the one of the high growth units of Infosys: revenues were up by ~44% in FY 2011 and are up 23% in fiscal Q1-Q3 2012. The high growth has been driven primarily by the following sectors

• Banking, driven by QA and testing transformation • Healthcare sector, driven by regulatory reforms • Retail sector, with e-commerce initiatives •

Energy and utilities: smart grids in.

IVS has also performed well in Australia. In its reporting structure IVS reports directly to Infosys ‟ Board of Directors to ensure its “independence” to other units. The unit has a headcount of ~13,000, representing ~9% of total Infosys; headcount. 90% of IVS work performed is standalone testing. 10% comes from larger contracts with development and testing bundled.

March 2012

IT Outsourcing: Infosys- Software Testing

IVS breakdown by sector is:

• Financial services 55% • Retail, CPG and life science 17% • Energy, utilities, communications & services: 11% • Healthcare 11% • Manufacturing 6%. In addition, Infosys has set up in 2011 a subsidiary in the U.S. to address heathcare and public sector opportunities globally, Infosys Public Service (IPS). IPS is headquartered in the U.S. Healthcare contracts have been transferred to the unit, , some of the working provided being testing. IVS services mostly

• U.S.-headquartered clients (67% of revenues) • Europe 16% • Rest of the World 16%. The unit has 220 active clients and counts 15 testing clients with annual revenues greater than $10m. It has 25 client-dedicated large TCoEs, each of them using 100 personnel and more, including personnel from clients, Infosys and third parties.

Technology Vendor Clients Infosys services technology vendors whose activities include enterprise and consumer software; media and entertainment products; storage products; computing; software middleware and communication equipment. Of those client segments, ISVs (enterprise and consumer software) are the largest. NelsonHall estimates ISVs represent two thirds of revenues within technology vendors. Services provided by Infosys to its technology vendor clients include:

• Product testing: globalization and localization development and testing • User acceptance services in the form of business process validation • Compatibility and interoperability testing services.

March 2012

IT Outsourcing: Infosys- Software Testing

Enterprise Clients Infosys services enterprise clients primarily through its IVS unit and to less extent by its Mobility business unit, whose work also includes testing. Around 10% of this amount comes from contracts where Infosys is awarded the test only part of the contract. In the remaining 90%, Infosys provides development/enhancements and tests: in those cases, each service is delivered by two different organizations.

4.1 Service Offerings Infosys has a wide range of testing services, which include:

•

Validation services of custom applications (70% of IVS revenues). Services provided encompass functional testing, in the form of business process testing, systems integration testing and offshore execution. IVS now includes test automation for functional testing as part of its functional testing offering

− Infosys also provides UAT services on a selective basis, based on its knowledge of the applications of its clients

− NelsonHall estimates that functional testing automation represents 15% of the revenues of IVS

•

Specialty validation (25% of IVS revenues):

− Performance engineering and testing − Packaged application testing e.g. ERP testing. See section 3.5 Specific Offering: ERP Testing. Currently, ERP testing represents 8% to 10% of IVS‟ headcount

− SOA testing − Regulatory compliance and testing − Data warehouse testing e.g. data quality for data analysis − Test data management e.g. data masking for test execution done in offshore locations. Data masking helps circumventing regulatory or privacy restrictions around data locations. The service includes both data masking and data cleaning and replication. Examples of clients for this offering include banks engaged in M&As and merging their client data and information

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Hosting of test environments

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Security testing.

March 2012

IT Outsourcing: Infosys- Software Testing

• Consulting services

(5% of IVS revenues). Offerings include quality assurance, program management, and packaged applications (helping client determine what potential problems may arise from the usage of packaged applications and of related customization work)

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QA consulting has expanded from testing excellence, validation of requirements to business goals

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IVS has developed a methodology for shifting the focus of QA from technical to business. Examples of such shifts include: improving the test life cycle of a datawarehouse of a telecom service provided to increased sales; improving data validation quality to avoid regulatory penalties for an investment bank; improving order management systems availability of a telecom service provider for incremental revenues; proactive performance testing for a financial services firm ‟s risk management portfolio, helping reducing risk.

Of those three main groups of offerings, Infosys is highlighting that most demand lies around specialized offerings and in particular around ERP testing, regulatory compliance and BI/testing data management as well as around QA consulting services.

Cloud Infosys has developed a Testing as a Service (TaaS) offering which include HP testing tools in a pay-per-use model and Infosys testing services. The offering is targeted at clients that have no perpetual license from HP or need to add extra licenses

• The TaaS offering is available on HP tools for test management (HP QC) functional automation Runner)

(HP QTP) and performance testing

(HP Load

• Hosting is done by Infosys in its premises, in a third party datacenter (including cloud) or in the client‟s premises, which also provides the underlying IM and maintenance of the tools. Examples of engagement for this offering include

• Moving a managed testing service with delivery from an Infosys TCoE to a TaaS offering. The move was made to accommodate the variations in performance and functional testing

• For a small client that did not want to acquire tools licenses and rela ted maintenance, Infosys is providing test case-based pricing for test automation (including the HP software tool) and performance testing. Overall, the TaaS offering has been most successful in emerging countries and for performance testing. TaaS is one element of a broader cloud-related testing offering IVS has developed. IVS is also involved in testing applications that are ported to a private cloud (or public cloud), conducting non-functional testing e.g. security and performance testing. The cloud testing services follows demand for private clouds, and especially from emerging countries and from mid-sized clients, rather than large enterprises.

March 2012

IT Outsourcing: Infosys- Software Testing

Key offerings include: • QA infrastructure assessment for Cloud • Cloud migration of QA infrastructure • Cloud testing • Cloud readiness testing.

4.2 Assets and IP Infosys has several strategic initiatives in place related to expanding its testing service offering;

• Translating in a formal manner its domain expertise through Vertical Solutions and develop its methodologies and frameworks

• Invest into tools to shorten test planning and execution through Technology Solutions

Vertical Solutions and Methodologies IVS has developed domain solutions for the five major industries it operates in. Those solutions include test cases and automated test scripts. The five verticals are

• Financial services: payment and cards; consumer banking; securities trading and processing, wealth management; risk and compliance; insurance. Infosys has

− 9,000 test scenarios for core baking (secure lending; unsecured lending, wealth management; treasury: trade finance; deposit; e-banking; and CRM)

− 4,300 test scenarios for payments (SWIFT; and U.S. and U.K. payments) • Retail: PoS; ecommerce application, inventory management and Oracle Retail. Infosys has:

− 8,300

test scenarios for ecommerce (account registration; product checkout; promotions; miscellaneous; and Sterling order management)

−

900 test scenarios for POS (online transactions; store procedures; and miscellaneous)

• Insurance, healthcare & life science: healthcare claims, laboratory information management systems, L&P claim management, as well as ICD10 compliance

• Communications, media & entertainment: wireless in the box, customer & billing, e-TOM L4 and M5 processes

March 2012

IT Outsourcing: Infosys- Software Testing

• Energy & utilities e.g. advance metering infrastructure and trading. Infosys has 400 test scenarios for advanced metering infrastructure (customer service; billing; payment credit and collection; customer care and billing; customer self-service; account setup and management: meter data management systems: admin/CSR demand-side management; energy audit; and other). The domain solutions are supported by InFlux, a collection of methodologies and tools for blueprinting. IVS derives 4% of revenues from domain solutions i.e. influenced in a major way the win of the contract. Other vertical tools include:

• FTGEN, a model-based testing asset. It generates manual test cases based on business processes entered into BPM tools e.g. Microsoft Visio. The generated test cases can then be uploaded into a test management software e.g. HP Quality Center

• Infosys Test Automation Accelerator (ITAA), helps generate test scripts from English language test cases into HP QTP and IBM Rational Functional Tester. The framework is both data- and keyword-driven. IVS is complementing its vertical solutions by developing test repositories around SAP applications. The unit has taken wherever possible a business process approach e.g. procure-to-pay. IVS has also created methodologies for new implementation contracts, taking a risk management approach as well as a collaborative testing transition framework. The two methodologies are used particularly for complex and large contracts or for those contracts involving TCoEs.

Technology IVS is expanding its tool focus from functional testing to specialized testing services e.g. SOA testing, MDM testing performance testing, test automation. The practice has developed several tools:

• Schema Linked Assertion Testing Engine: a SaaS tool (hosted in private or public clouds) providing grey-box testing for validating message formats

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The tool handles industry standard formats as well as customized formats. In addition, Infosys can modify the validation algorithms and validation features

− The service is billed on a pay-per-use basis for validating messages • A datawarehousing software test automation tool. It is used typically in situations including regulatory reporting, M&A, BI reporting and data migration. The tool provides a data quality analysis according to several parameters including meta data, statistics, relationships, patterns and business rules

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The tool supports several (unnamed) relational databases

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is a web-based workbench

March 2012

IT Outsourcing: Infosys- Software Testing

− It is designed for use by power users rather than career testers • Infosys Metrics Dashboard (IMD): a tool to respond to increased demand, especially as part of managed testing services to measure productivity and metrics. The tool integrated from different sources whether from HP QC or any test management software or from time records. The tool can be configured to mirror the hierarchical structure of the client. It has been pre-populated with 75 metrics fields and 25 dashboard templates

• Infosys ACCORD: a grey-box testing tool for multiple applications, multiple technologies or for complex business process flows. The tool provides primarily snapshot-based regression testing as well as overall functional testing. ACCORD provides integration testing without depending on the user interface

• An online testing workbench that reports in a systematic manner all information related to the application being tested. Infosys has announced the following upcoming assets:

• QA Environment Assessment Engine: the tool will assess testing environments in terms of needs, capacity and utilization and recommend optimization methods e.g. virtualization

• Test Authoring Platform: a tool generating business processes-based test cases from BPM tools. The intend of this tool is to create industry specific test scenarios that would be reusable

• Infosys Test Data Accelerator: a workflow tool to accelerate the creation of test data, reserve test data, managed federated data relationships and generate secondary extracts.

4.3 Engagements IVS provides testing services in several forms including T&M, fixed priced, SLA/unit of work/outcome-based. NelsonHall estimates that the split by revenue is T&M and fixed price 70% of revenues, SLA 30%. IVS is reporting a shift in client demand for managed testing services where SLA requirement are moving from productivity items e.g. number of test cases designed, to pay as you go pricing.

March 2012

IT Outsourcing: Infosys- Software Testing

4.4 Target Markets and Clients Recent large contracts won by Infosys include:

• A large South American bank: a $20m contract for testing the Finacle application. Services provided include systems integration testing, end-to end testing, UAT testing support. Working language was Spanish

• An large ISV: a $20m contract • A large bank in Asia Pacific: a $17m for functional testing of the online banking portal of the client, as part of a transformation project

• A U.S. investment services firm: a 3-year $16m performance and consulting service contract

• A wealth management firm: a $10m end-to-end testing contract • A European cooperative: a $8m contract for providing regression and systems integration testing contract around a Finacle application

• A wealth management and financial services firm‟s transaction services group: an $8m contract for setting up and operating a testing center of excellence.

4.5 Specific Offering: ERP Testing Background In 2008, IVS has launched an ERP testing practice and offering to address ERP projects. The unit has launched the offering based on the finding that testing a packaged application requires different skills from a custom application:

• ERPs are updated frequently as part of ISV maintenance contracts • ERPs are integrated with multiple applications and rely on different databases, using data can have different structures

• ERPs, in spite of their high level of customization, rely on standard business processes, allowing for business process testing automation. As a result, IVS‟ service offering for ERP testing includes apart from the traditional QA consulting, business process testing across modules, TCoE set up and execution:

• Automated regression testing for frequent updates • Systems integration testing for testing interfaces and integration tools • Master data testing / datawarehousing testing for testing vast number of data, data cleaning, data generation and avoiding unnecessary data replications

• Performance testing for coping with interfaces. IVS has ~1,000 to 1,300 career testers in its ERP testing practice.

March 2012

IT Outsourcing: Infosys- Software Testing

Service Capabilities Applications covered by this service include SAP, Oracle applications, Siebel and PeopleSoft HCM. Of those offerings, the SAP testing one is the most in demand. This is due to the fact that SAP has a larger client installed base. Within ERP testing, IVS is finding that Oracle Apps and SAP have their own challenges:

• Oracle has a series of different packaged applications that have their own architecture, programming language and integration tools. Testing them therefore requires taking into account this heterogeneity of applications by having segmented offerings. In the future, Oracle with its Fusion initiative will make its applications overall more consistent and easier to test. IVS targets for this offering the manufacturing sector and retail; to a lesser extent, telecom media & entertainment, energy & utilities and pharmaceuticals.

IP and Tools IVS is investing into testing automation and developing test cases around core functionality and business processes. With this, Infosys intends to increase the level of asset re-use across clients. Restrictions will apply however as many clients still customize their business processes and screens: the level of re-use will therefore depend on how much customization clients will have done in their systems. This ERP-specific test repository is complemented by

• Pre-packaged business models: i.e. standard business processes • An automation framework for developing test scripts for customizations • Test Automation Accelerator with prebuilt components for components such as screens and reports. Test repositories include:

• SAP: FI, CO, MM, SD, LE, PP:

− Order-to-cash: 22 business processes and 72 test cases − Procure-to-pay: 15 business processes and 70 test cases − For order-to-cash and procure-to-pay, Infosys claims 100% coverage of the SAP business processes

• SAP IS Retail: merchandise management; SCM; store and multichannel; enterprise management and support: 238 test scenarios and 625 test cases. Infosys claims 24 out of 40 critical business processes are covered

• SAP IS Utilities: services management; customer services; SD: reusable test scenarios covering 70% of all functional areas

March 2012

IT Outsourcing: Infosys- Software Testing

• Oracle PeopleSoft:

− HRMS:

workforce administration; workforce development; time & labor; N.A payroll; benefits administration; self-services; eperformance and career succession: 366 scenarios and 364 business process components

− Financials: AR; GL; asset management and billing: 175 scenarios and 430 business process components. AP is work in progress

− For PeopleSoft, Infosys claims ~70% to 80% functional coverage • Oracle Siebel: sales, services, marketing: 492 scenarios and ~3,400 business components and support for 20 modules, developed for Siebel 8.0

• Oracle Ebusiness Suite:

− Financials:

GL, cash management, assets, payables, receivables: business processes and 26 test cases

− Manufacturing: inventory: 7 business processes and 7 test cases − Distribution: order management and purchasing; 39 business processes and 39 test cases

− HRMS: 9 business processes and 9 test cases −

iExpenses R12; 3 business processes and 7 test cases.

Target Markets and Clients Recent contract wins include:

• A U.S. railroad company: functional and regression testing for SAP applications

• A large consumer goods company in Europe: setting up a SAP TCoE. Part of the work will be catalogue pricing-based

• A nickel producer: roll out and testing of SAP applications • For a large bank in Asia Pacific: end-to-end testing of SAP • For a large U.K. bank: end-to-end testing of Oracle iExpenses workflow • For a large bank in Asia Pacific: data migration testing from legacy applications to Siebel Universal Customer Master.

March 2012

IT Outsourcing: Infosys- Software Testing

4.6 Specific Offering: Testing to telecom service providers Overview IVS derives ~6% of its revenues from telecom services providers, ~$36m as estimated by NelsonHall for calendar 2011. The unit, created in 2009, targets telecom service providers as well as media & entertainment clients. Current headcount is ~1,000. IVS has positioned its telecom service provide testing offering around three functions: fulfillment, assurance and billing, based on the eTOM model, an industry standard that describes the business processes required by a telco, across three layers: business, services and network:

• Fulfillment:

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Business: sales force automation, CRM, order entry and order management

− Service: service configuration and service activation •

•

Assurance

− Business: SLAs and QoS management −

Service: trouble ticket management, SLA/QoS management

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Network: fault management

Telecoms-Specific Offerings The company highlights several key offerings, which address key client trends:

• End-to-end validation of business transformation i.e. business process testing as part of transformation projects and in particular for

− Convergence and quadruple play projects − Operation separation compliance like the Openreach carve out from BT in the U.K. Infosys highlights similar experience in Australia, New Zealand and Singapore

• Wireless in a box: is a business process-based testing service for wireless operators: IVS has built a repository of test cases for packaged applications from Oracle and its Siebel for customer care and BRM (Portal Software) suite. The repository of test cases runs through the various layers of a telecom service provider: business, services and networks across the fulfillment, assurance and billing function

− IVS advocates that the test case repository can be extended in less than two weeks for usage on different software applications from other ISVs including Amdocs and Clarify on respectively OSS and customer care

− The test cases have been automated to run on HP Business Process Testing BTO tool

March 2012

IT Outsourcing: Infosys- Software Testing

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This offering was built on a large engagement done in Australia for a telecom service provider (see section Key Clients). It is designed for clients with Greenfield operations or those migrating to packaged applications. It therefore include an accelerator for integration middleware

• Validation of customer care and billing systems. Key Clients The client base of IVS includes telecom service providers in the U.S., the U.K. and Australia as well as in Belgium, and cable operators in the U.S. Key contracts include:

•

A telecom operator incumbent in Europe:

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The telecom authority of the country has requested in 2005 to give equality of access to competitors of the client incumbent over the “last mile access”. The move was designed to increase competition in the broadband access and fixed telephony markets. Meanwhile the telecom incumbent decided to set up an organization, independently from its wholesale activities, which would control the last mile operations to all telecom service providers

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As a result, the incumbent had a large transformation project, focusing on OSS and Management Information Systems. The unit was also involved into the creation of the Equivalence Management Platform. The client worked together with 7 IT service vendors to separate the applications and create the new equivalence application. The applications were meant to be used by seven service providers and included 45 components and 120 interface

− Infosys was one of the 7 IT service involved in the build phase. It was also selected the software testing partner for the project. The testing effort has lasted four years and has required the work of up to 400 testing professionals along the years

− Testing service provided by IVS included end-to-end business processbased testing services for applications. The applications allowed provisioned of telecom services over different technologies including copper lines, fiber optics, and ISDN lines

− IVS initially spent 18 months on putting processes in place and create a TCoE initially around functional testing, writing and executing test cases. IVS also provided occasionally performance testing around the applications and supported UAT. The unit focused on increasing the level of test automation at the functional level for the planned releases of applications

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IVS was responsible for demonstrating the functionality of the applications and getting the sign-off of the 7 telecom service providers

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Offshore ratio has grown from initially 10% offshore to 90% offshore at the end of the contract.

March 2012

IT Outsourcing: Infosys- Software Testing

• An APAC telecom service provider. The client has migrated from selfdeveloped applications to packages and selected a large number of different applications from several ISVs and integrated them. The move included providing an integrated customer experience across offerings e.g. fixed, mobile, broadband, pay TV, information and search.

− The client announced in 2005 its intention to consolidate its number of applications from 1,500 to 300 by end of 2010. The project had an initial cost of AUS 2.4bn that was extended by AUS 1.5bn

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Infosys was selected for leading the transformation around the client’s BSS. IVS was involved in testing the BSS application, which involved ~150 personnel

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Testing only: the client favored an onshore-centric approach to mitigate the level of risk. Initially the offshore leverage was only 30% going up to 65% at the end of the project. The client requested to keep onsite client-facing activities

− Testing services provided were business process testing −

IVS took a risk-based approach to testing, which led to reducing the number of test cases and reducing the effort and cost.

Delivery Capability IVS relies on its 10 delivery centers in India for providing testing services. Each of those ten delivery centers is large enough to deliver the full range of testing services, from functional testing to specialized offerings. IVS has as part of Infosys‟ overall expansion strategy added some nearshore presence in select locations:

• Shanghai (China) acts as both a nearshore and local center, servicing the operations of U.S. clients in China as well as local clients, providing language skills. The center is meant to service Japanese clients in the future. The center has less than 500 career testers

• Monterrey (Mexico) services clients in Central and South America as well as North American clients. The center has less than several hundreds of career testers

• Brno (Czech Republic) provides nearshore services to European clients: services provided include ADM, service desk as well as testing. In testing, the primary purpose of this center is to handle different languages for services such as test planning, test project management and test design, together with India-based teams. The center does not focus on test execution

− NelsonHall estimates the Brno center has ~50 career testers. Over time, Infosys intends to grow its Poland center complement its Brno center in terms of cost structure.

„aggressively”, to

March 2012

IT Outsourcing: Infosys- Software Testing

Strengths and Challenges NelsonHall believes that software testing vendors need to demonstrate their software testing capability along the following attributes:

• Ability to recruit and grow headcount in India, as well as complement presence onshore

• Specialization in a number of verticals and preferably sub-verticals. This specialization is expressed in terms of headcount and also in terms of effort by the vendor to provide its teams strong domain knowledge

• The effort that the vendor is leading on creating, for test execution purpose, test cases, and preferably automated test cases, that can be somewhat re-used across clients, and shorten testing execution. More generically, vendors are assessed on their capability to complement commercial testing tools by their own IP

• Ability to expand from pure test execution to QA consulting, to improve as part of the SDLC the quality of the code developed

• Experience in providing software testing work under several engagement forms including staff augmentation, fixed price, risk and rewards

• Industry leadership, introducing new offerings e.g. around cloud computing and warranty or new types of applications e.g. mobile apps. Exhibit 1 shows NelsonHall‟s assessment of Infosys‟ testing capabilities according to these criteria.

Exhibit 1 Assessment of Infosys Testing Capabilities Criteria

Assessment

Ability to recruit offshore/ onshore presence

IVS is one of the Indian top vendors whose ability to recruit talent in India is unmatched. Onshore presence is still limited, apart from China. Yet IVS stands out by its nearshore presence in Mexico

Specialization by domain

IVS‟ strength lies in financial services. Given the size of IVS, its presence in other verticals where the unit is less present is now gaining in size and looks favorably to other vendors

Creation of artifacts and IP

IVS has maintained its effort on creating repositories of test cases around ERPs as well as around key vertical‟s main business processes

Consulting capability

The level of consulting resources is in line with market average. Like most competitors, IVS tends to embed consulting within large contracts that are transformational, rather than as standalone contracts

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IT Outsourcing: Infosys- Software Testing

Experience in handling complex projects

This is demonstrated by the number of large wins that Infosys has: contracts with value above $10m

Industry leadership

Industry leadership is in line with the market. IVS tends to focus on existing market opportunities rather than on creating hype around specific offerings

Outlook Infosys has all the ingredients of the major and successful software testing offerings e.g. creation of domain expertise and assets, investment in complementary tools. The testing capabilities of Infosys also include product engineering and mobile device and mobile application testing. We expect Infosys to develop its standalone QA consulting capabilities and also increase its language skills for conducting testing contacts with non -English fluent clients.

ÂŠ NelsonHall 2012

March 2012