On November 13th, Tricentis will be opening its annual user conference in its home town, Vienna. What will founder and chief product officer Wolfgang Platz be saying to his customers, his staff, and his company’s network of business partners? We asked Platz for an update on strategic thinking and product development at Tricentis, starting with a verdict on the acquisition it completed last year with QASymphony and its qTest suite of testing solutions.
Q: How has merger with QASymphony worked out?
A: The good news is that annual recurring revenue is growing more than 70% – and that is the sum of Tricentis and QASymphony revenues for 2019 compared with 2018. What’s the story behind that? At the start of 2017 we got this big investment from Insight Venture Partners [the private equity investment firm took control of Tricentis vi a $165 million financing] and the reason they found Tricentis very compelling was the hypothesis that in the enterprise segment Tricentis could replace HP. The idea was that Tricentis will be the new HP. [Hewlett Packard Enterprises sold its software businesses, including its test automation products ALM and UFT, to Micro Focus in 2017.] That is the market we were going after successfully with our flagship product, Tricentis Tosca. But but we did not at the same time get the momentum we had hoped for in the test management and the manual testing space simply because Tosca is viewed as a pretty feature rich suite and it feels a bit heavy for those other people. By contrast, QASymphony’s qTest product is more lightweight; cloud based. We felt we could drive the Micro Focus replacement strategy more aggressively together as one company.
Q: And you must be delighted with that revenue increase?
A: Yes of course we are! This is playing out very well. QTest is a spearhead that helps us get into more enterprise customers, especially if those customers want to move more towards DevOps and Agile and they want to use modern tools like Jira.
Q: So you say you are succeeding in winning market share from Micro Focus. Where else are you winning business?
A: Most prominently we are replacing Micro Focus ALM. This is where most of it comes from. The other major revenue gain is from replacing the most popular test management tools: Word and Excel. There are still a lot of customers who have not decided to buy professional tools.
Q: what trends are you seeing in the way your customers are doing testing, and in the tools they are using? You are presumably facing more competition from open source tools, for example?
A: Well, yes, I agree that open source is becoming more prominent. What we also see is a sort of competition between a couple of other important trends in testing. Firstly – and this is very prominent – we are seeing shift left, where people try to inject testing as early as possible into the software development lifecycle, to get testing close to development . It’s a good idea, but the issue is that a lot of those guys forget about the higher levels of testing. When you only have shift left, then you run into challenges sooner or later. Some things are missing.
And the second trend gaining more attention is a shift extreme-right, where for certain applications people do not bother with much testing, but move things right into production and do testing only after that. They might simply do some canary deployments, or blue/green testing, and I would say these are more like deployment strategies in conjunction with limited testing – a sort of hybrid. Basically, you’re saying ‘Screw it, we just going to go into production’. This is a valid idea for low risk applications and if you have a high number of users and you have low-risk applications this makes a lot of sense.
This is clearly not a suitable approach for financial services firms. What’s happening right now – and we’ve done a study of Swiss banks that has shown this trend clearly – is that financial firms have all gone for shift left and are now facing the issue that – wait a minute – my unit tests are evaporating over time because it’s a super-high effort to maintain them. We say: you have to make sure we have a higher level integration and a strategy for catching these challenges that come into production. This is where Tricentis shines: we increasingly focus on the higher level of testing in conjunction with testing core applications, such as SAP.
Q: One general view that the marketplace has of Tricentis and its tools is that they have a high impact. They make a big difference to firms, converting manual testers to automated tester. However the growing need is for consultation, changing process, not just the people. So does Tricentis have to become more of a consulting business?
A: This is true. If you want to differentiate vis a vis open source, how else do you do it? You can differentiate yourself if people don’t have the capabilities and the skills they need to build stuff on their own. If they do build stuff on their own – and let’s leave aside whether they realize the total cost of ownership they were aiming for – they are going to fall in love with it. Their baby is going to be the prettiest baby in the world. That’s OK, that’s fair. But what it also means is that you will then have people who have not been so professionally well-organised in software testing.
We want to help our customers transform. We have implemented a transformative sales process which introduces two streams. One operates on a technical level where we introduce the merits of our software to the practitioners. The second is establishing a business connection with a higher level of decision making, where we make the senior management familiar with the idea that this is going to be a transformational journey. And this journey requires consulting.
The downside of consulting is that it does not scale as quickly as tool sales. So we have a clear commitment to work with our [consulting and systems integrator] partners on that, in addition to ramping up our own consulting resources. Over the past couple of years, however, things have been very different regarding the quality of partners and our best partner today is generating revenue for us and more success in customer implementations than all the other partners put together. This is a partner with real size, and with a partner that size we can are really able to move the needle.
The most relevant change you will see is in the way we engage with customers. Our engagement in the past was driven by the attitude of ‘Let the tools speak for themselves’. It was a product sale rather than a consultative, transformational, sale. In introducing this consultative stream we have made the assumption that it would not slow down tools sales or reduce the size of the sales ticket. But it took us some time to accept this internally, that this process would accelerate business not slow it down. Now you will see us going for more transformational mandates, especially with financial services firms.
Q: At the time of the investment by Insight Venture Partners in your firm, you predicted consolidation among vendors in your marketplace, driven by the desire of major customers to transition to DevOps. Do you have another acquisition in the pipeline?
A: There are things lined up but I can’t talk about them. I can point out that our list of acquisitions has been impressive. Apart from QASymphony there has been Flood [performance testing], LiveCompare [impact analysis, primarily for SAP testing] and most recently [in August 2019] TestProject, an open-source based framework [for Appium and Selenium users]. TestProject is important and shows that we have a finger on the pulse of how people are using such frameworks.
I can also say that the process of consolidation is continuing. There will be a new wave of consolidation driven by the theme over-arching automation. The dynamics of RPA [robotic process automation] are that it will come to a plateau soon because people will find RPA does not fully justify its promises, because bots break, because the documentation is not easy, and so on. Is also clear that automation skills are so valuable as an asset that you will want to have an integrated enterprise automation strategy. And this is what I predict you will see over the next eighteen months to two years: you will see RPA and software testing move very close together. You will see acquisitions from RPA into software testing automation and vice versa.
Q: What will you be saying when you stand up to address your own conference in Vienna?
A: I’m going to talk about this macro-trend of the convergence of automation technologies; about AI and software testing. And I am going to introduce some stunning stuff we have been working on. For the first time in history we have produced an optical character recognition engine that works like a human being, that can recognise the same number of images per second – that is 24 per second – on a screen as a human being. This is the entrance of new user interface in automation that people have been trying for, but have not achieved. We have filed patents on these specific technologies underlying these OCR and recognition capabilities. So I will be introducing some cool stuff.
