SDLC Solutions carves out its piece of the testing market

(By Anthony Miller – Friday 22nd May 2009 8:00am). It was great to catch up the other day with SDLC Solutions co-founder and MD, Pete Stock, and NED Jim Beagle. Privately held SDLC is one of the ‘Little British Battlers’ in the UK testing services market that I first discovered back in September (see Testing times).

They’re small but growing fast. This year (to March) SDLC grew 28% to £12m and run a 9% operating margin. They have a few under 200 employees and are to all intents and purposes, UK focused. Most of SDLC’s business comes through the SI channel via the likes of Fujitsu, Capita and HP, though they also work direct with major enterprises such as O2 and RBS.

There were a couple of things that I found particularly interesting about SDLC. Firstly, they haven’t (yet?) seen the business slowdown that caused the surprise profit warning at much larger testing services player, SQS (see Testing services slowdown prompts SQS profit warning). This may, of course, just be a matter of timing, given SDLC’s customer set. Stock is certainly seeing pricing pressure: “We just have to work harder to carve out our piece of the market”.

Much related to this is the dilemma facing Stock over offshore service delivery. SDLC has for some time partnered with Chennai-based DSRC, a typical founder-led Indian IT services player, with offices in Santa Clara, Singapore and, I note, exotic Beckenham. At any point in time, SDLC may have up to 15 of DSRC’s 1,500 FTEs working on client projects. But Stock says that he is getting some customer push-back because he doesn’t own his offshore workforce. Now, you can argue the toss whether this is a ‘structural’ problem or simply a sales and marketing issue. But in any event, Stock knows that he has to boost SDLC’s offshore delivery way beyond the current sub-10% effort mix if he is to remain competitive. He’s looking at various options, but in fairness to SDLC I won’t go into them here.

I see SDLC as a microcosm of the ‘micro’ end of the UK software and IT services market. Founded by entrepreneurs, niche players, ‘blue-chip’ customers, fast-growing, profitable. But how do they get from double-digit revenues to triple-digit? This is a theme we will come back to again. Meanwhile, we hope Stock and the team keep on carving!