QA Financial’s Leadership insight: Panaya CEO Jake Klein
The $200m purchase of Panaya by Infosys has not been without controversy. Some Infosys shareholders complained about severance payments made to the former Panaya CFO following the 2015 deal. However, in its earnings report for the second quarter of 2017, Nasdaq-listed Infosys stated that the investigation it had commissioned had found no substance in accusations of wrong-doing.
While the Panaya acquisition had become a focus of concern among shareholders who had wider concerns with the management of Infosys, whose share price has flat-lined this year, there is equally plenty of evidence that Panaya has been a good deal for Infosys. In the latest Infosys earnings report, it was stated that Panaya, as well as other new software business including Finacle, NIA, Edge and Skava, contributed 1.6% to Infosys's revenues of $2,728 million in the second quarter. A relatively small slice of a large pie, but Panaya is now "the test automation platform of choice" in the Infosys toolbox, according the Jake Klein, the former head of corporate ventures and M&A for Europe and the Middle East who became CEO of Panaya in December 2016. Prior to joining Infosys in 2013, Klein worked at SAP and was one of the four original team members who led the product management of SAP's HANA database and application management platform.
Panaya began life 11 years ago as an Israeli start-up premised on the application of advanced IP code to the analysis of enterprise resource planning (ERP) upgrades. This involved analysing a customer’s ERP customisations on SAP or Oracle and in turn reduced the time, cost and risk associated with the upgrade by 30-40%. The company then moved into broader test management and test acceleration services. Since its acquisition by Infosys in March 2015, the core focus has been on end-to-end testing and application lifecycle management.
What's next? QA Financial spoke to Klein about the challenges Panaya is facing in building business in the banking, finance and insurance services (BFIS) vertical.
Q: Why would you say Panaya is better placed than your competitors to help financial firms automate testing?
Our key advantage is that our testing products offer collaboration and visibility, and that's what large banks and financial firms increasingly require. They need it because of increased regulatory scrutiny of the systems and app delivery processes, and they need it because, typically, they have built their core enterprise systems from scratch and they are more precarious than those of manufacturing companies, for example.
The level of detail a bank requires during the planning, execution, and launch of an application compared to other enterprises is on another level. A bank needs to capture how the release was tested, ensure tests are documented, and capture evidence, which then needs to be shared with regulators.
We have found that Panaya’s solutions can provide that visibility into testing, and the fact that we can capture test documentation automatically is something that has proved particularly appealing to financial institutions. Last year, National Australia Bank chose Panaya to work alongside Infosys to build, run and test a technology solution that will enable the bank to participate in the New Payments Platform (NPP), the Australian banking industry’s programme for delivering faster and more data-rich payments.
As a software as a service (SaaS) provider, we also find that financial customers are often weary about adopting cloud-based solutions as they are very concerned about their customers’ data and its security. We generally do not capture personal identifiers, but it is a sensitive topic and a definite challenge that all SaaS vendors face when working with large banks and insurance companies.
Q: Where does Panaya stand in comparison with the market leaders in test automation, such as Micro Focus or Tricentis?
In terms of competition, firstly there are the established market leaders, the largest being HPE [now owned by Micro Focus following a £7 billion acquisition completed in August 2017], which has traditionally held around 40% to 45% in market share across all enterprises in terms of test automation and application lifecycle management. However, as an on-premise solution designed around a waterfall-based model, it is extremely heavy and difficult to use.
Competition in terms of next generation testing providers, you have the likes of Tricentis – who actually partnered with Panaya earlier this year to deliver Autonomous Testing for SAP – and Worksoft. What Tricentis and Worksoft have done is they have focused on facilitating the creation and use of scripts in automated testing. They provide a wizard-based environment, essentially making it easier to create and run test scripts. However, these environments are still fairly complicated and require a dedicated professional to build and maintain them. So while these solutions lower the barrier to achieving automated testing, and increase the scope of automation to around 40%, financial institutions and other large enterprises are often limited in how much they automate as they do not often have the resources to invest in the developers to maintain the software.
Therefore, at least 60% of testing is still manual user acceptance testing (UAT), done by quality assurance or business users and no one has targeted that domain in 15 years. But we have. We have created a dedicated web-based application around UAT.
Q: What are the advantages of being owned by Infosys?
Infosys has around 2,000 global enterprise customers and so prove a very effective route to market for us.
Our synergy vice versa is in the technology differentiation we bring from their services perspective. I would say that we are the testing technology platform of choice for Infosys.
Q: How does the banking, finance and insurance services vertical compare in terms of growth potential?
Potentially, the BFIS sector is a huge market and there is a ton of money being spent on exactly the kinds of problems that we solve and address through test automaton and Enterprise Agile Delivery.
Infosys has an extremely strong financial services business, which currently accounts for around 20% of its revenue. However, as I mentioned earlier, as an SaaS company, we find it difficult to penetrate the market effectively.
Q: As a test automation company, what are the challenges Panaya faces?
Because we have dramatically extended the scope of what we do and have pivoted away from system upgrades, the biggest challenge we have right now is generating awareness of our enterprise testing and Enterprise Agile Delivery solutions. There are a lot of players in the testing domain, but we are building our identity.
We were traditionally known as the go-to company for your SAP or Oracle upgrade, but now we want to be known as the go-to company for automated UAT and agile application delivery.
Q: How do you approach new business in the banking, financial and insurance vertical?
Banks want to see a return on their investment. And so, when we have an opportunity to participate in a contract with a financial client, and we are not disqualified for the fact that we are SaaS only, we are able to communicate very clearly their RoI – particularly on the testing side. For example, it was the dramatic reduction in the time it took to conduct UAT and the ability to increase the scope of what NAB could test for a long-term lower cost that caught their attention.
Financial institutions place a lot of value around impact analysis and having complete visibility into the end-to-end testing process. For example, if you have an existing procurement system that is working and want to add some additional business logic or rules around PO approval, the potential downside of introducing an error, or a regression, to that system – which is already up and running and managing hundreds of millions of dollars of business – may far outweigh the benefit of adding an additional feature.
Q: What does the future hold for Panaya?
If you look at the testing and agile delivery market, it is huge – it is valued at around $2 billion, and is growing approximately 10% each year. The reality is that, currently, there are not many competitors focusing on automating UAT and we plan to take advantage of this. We also have an existing large customer base from our upgrade service, which is ready to be approached with our additional value propositions of continuous delivery and testing.
Finally, as part of Infosys, we are growing quicker than ever. In recent years, our APJ market has grown surprisingly quickly and is now a major contributor to our overall business. Our solutions are designed for all enterprises, and we will continue to grow in all sectors including in the financial market.