Trading Update

14 January 2011

SQS Software Quality Systems AG

("SQS" or the "Company")

Trading Update

SQS Software Quality Systems AG (AIM: SQS.L), the world's largest pure play supplier of independent software testing and quality management services, is pleased to provide an update on trading for the year ended 31 December 2010.

Following the material investments made in increasing headcount and growing our managed services business in the first half of 2010, the Company is pleased to report significant improvements in profitability in the second half of the year. Despite continued competitive pricing pressure and the deferral of €0.5m of budgeted high margin software sales into 2011, adjusted profit before taxation for the year is expected to be broadly in line with consensus estimates.

The Company expects to report revenues for the year to 31 December 2010 ahead of consensus, principally due to success in winning contracts within the Managed Services business. As has been previously highlighted, such contracts, which provide enhanced longer term visibility, tend to generate relatively low margins in their early stages.

Whilst we saw increasing demand for our services across all our core geographies during the year, our businesses in Germany and the United Kingdom were the main contributors to growth.

Rudolf van Megen, Chief Executive Officer of SQS commented, "During 2010 we have made significant steps forward in growing the Company and increasing our market share and we are delighted that the investments made in the first half have borne fruit. It has been our stated strategy to focus on expanding our Managed Services business and we are especially encouraged by its performance. Our Managed Services contract wins during the period give us confidence in improved visibility, margins and profitability in the medium to long term."

The management of SQS will be hosting a conference call for analysts at 9.00 am today. If you require dial-in details please contact Bob Huxford on 020 7933 8783.

SQS will be announcing its preliminary results for the year ended 31 December 2010 on 9 March 2011.

Enquiries:

About SQS

SQS is the world's largest pure play supplier of independent software testing and quality management services. SQS consultants design and oversee quality management processes during the software and IT systems life cycle and test the resulting products for errors and omissions.

Headquartered in Cologne, Germany, SQS has approximately 1,900 employees across Europe, Asia, North America and Africa. The Group has a presence in Germany (Cologne, Munich, Frankfurt, Stuttgart, Goerlitz and Hamburg), the UK (London, Woking, Birmingham, Manchester, Belfast), Ireland, the Netherlands, Switzerland, Austria, Sweden, Norway, Finland, India, Egypt, the United States and South Africa. SQS also has a minor stake in an operation in Portugal and a partnership operation in Spain.

With more than 5,000 completed projects, SQS has a strong customer base including 35 FTSE-100 companies, more than half of the DAX 30 and a third of the STOXX-50. It supports clients in a wide range of industries, including major corporations such as Allianz, Beazley, BP, Centrica, Commerzbank, Daimler, Deutsche Post, Generali, JP Morgan, Meteor, Reuters and Volkswagen.