SQS Update

(By Anthony Miller – Tuesday, 10th March 2009 5:55 pm). I’ve just been speaking with the SQS top team, CEO Rudolf van Megen, CFO Rene Gawron, and UK CEO David Cotterell and remain impressed. The VeriSoft acquisition brought with it an extra bonus besides supplying lower cost delivery. It seems that SQS’ typical contract length was around 3-6 months; however, they are finding that when they sell a blended service, the client typically commits for a year or more. This will surely mean that the 14% of revenues from long-term contracts will increase again this year as SQS ramps offshore delivery. Indeed, like most IT services players, SQS expects offshore headcount to rise much faster than onshore.

On the competitive front, SQS sees more of the larger systems integrators than the ‘pure-play’ independents. Cotterell commented that TCS are pretty active on testing, but they are also meeting Sogeti (Capgemini’s bodyshop, but with a testing ‘strong suit’) and also Logica. No mention of market leader Wipro, which generated $473m from testing services in 2008, almost double TCS’ $243m. Obviously it’s a tough battle for SQS to win in a customer already using an Indian SI, but they have a much better chance head-to-head in new accounts, where their European heritage plays well to the more offshore-averse Continental clients.