Austin Business Journal

TESTCo Moves Beyond Software Developers

Any business making software now a target

By: Christopher Calnan

Creating software isn’t just for software companies anymore, so a local testing company has restructured its business model to expand beyond software developers.

Austin-based TESTCo, founded in 2002, has shifted its target market from software makers to all businesses developing software and offering software based services.

“We’re taking everything we learned about software testing to companies that write the code for software and the services companies that internally produce their own software code,” CEO Jeff Hotz said. “It’s just a bigger target market for us.”

In recent years, TESTCo has shown a healthy growth curve, earning the company a No. 3 ranking on the Austin Business Journal’s Fast 50 list of local companies generating annual revenue of less than $10 million. From 2005 to 2007, its revenue increased more than 242 percent, from $1 million to $3.4 million during the three-year period.

The company operates with a distributed workforce in which just six of its employees work locally, while another 60 to 100 test software via the Internet from various foreign countries. India, Romania, the Ukraine and Mexico are the top locations for TESTCo employees, Hotz said.

Last week, London-based consulting firm Ovum projected that the market for software and systems testing will grow about 9.5 percent annually and reach $56 billion in revenue by 2013. It also reported that more testing is being outsourced to third-party services, with India as the top location for such testers.

The standards for software quality have risen as the information technology industry has matured. Glitches or bugs in software programs, once a common occurrence, are no longer tolerated, said Melynda Caudle, CEO of Austin-based Cooper Consulting Co.

Hotz acknowledges that the software testing sector is very crowded and that TESTCo, which he financed himself, has several competitors.

Last year, Massachusetts-based software tester UTest Inc. launched with a unique approach to testing software by enlisting 14,000 technologists from 150 countries to test software. The testers are paid only for each bug they identify.

The change to TESTCo’s business model comes as businesses are looking for ways to cut their costs during the recession, and outsourcing software testing helps them accomplish that, Hotz said.

Unlike installed software that is typically beta tested by a small sample of select customers for months before it’s made commercially available, on-demand software — or software that delivers its applications over the Internet — is continually updated. That also provides testers with additional business, but customers with a need for speed.

For example, customer New York Magazine, which uses customized software to provide online access and information to subscribers, enlisted TESTCo when it needed to build and release new business features faster, Hotz said.

“Most of our competition is looking for long engagements” with customers, he said. “We’re happy to work with people who need one tester for five days to get them out of a log jam. We’re very much an aspirin instead of a vitamin.”