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How Do You Reason About Automated Testing ROI?

ROI, or return on investment, is a metric to calculate the efficiency of any investment. In our case, we'll discuss…

By Testim,

ROI, or return on investment, is a metric to calculate the efficiency of any investment. In our case, we’ll discuss test automation. At the present, the competition is getting more robust. To stay in the race, many companies are working on getting so much done with less time and cost. You can meet this objective by automating test scenarios. Though automation testing requires more initial cost, the cost will reduce as the process progresses.

Automation testing has a lot of advantages over manual testing. Still, it’s not necessary to automate everything. Automation testing is useful for testing regression scenarios. This is because, in regression testing, testers need to work with huge data sets. The automated testing ROI helps in finding out whether the shift to automation is worth performing. Just think about the time required to set up and execute test cases with manual labor. After that, compare it with the time taken to set up the same test with the help of an automation tool. Finally, check the ROI in both cases.

So is your company going to start working on a new project? You must be thinking about implementing automation. While doing so, you may be unsure about whether implementing automation will be helpful for your project in the long run. In this post, we’re going to discuss how you can calculate ROI before implementing test automation. We’ll cover the need for calculating ROI, the calculation process, and some advanced techniques and best practices for making these calculations.

Let’s get started.

Why Do We Need to Calculate ROI

So why do so many companies adopt automation testing? First of all, automation increases test coverage. You can execute many test cases in very little time. Also, it reduces cost in the long run, minimizes the risk of failure, and identifies bugs earlier.

Just consider automating your test cases when there are repetitive tasks. Usually, automation testing is five times faster (maybe more depending on the test scenario) and more efficient than manual testing. For instance, suppose you automated the test cases of the development cycle. Later, it would take little time and effort to retest them during the next cycle.

We can simplify this and state that automation testing is a one-time investment. Once you configure the process properly, it’ll be beneficial for your company in the long run. And the best way to measure whether your company or project needs automation testing? The answer is simple. Calculate ROI.

Metrics Required While Calculating Automated Testing ROI

As I said earlier, ROI is a powerful way to test the efficiency of test automation. As a matter of fact, it helps to evaluate the overall quality of the product as well. While calculating the ROI, don’t focus only on the cost. Keep other parameters in mind. These parameters include late releases, lack of quality, defects that go unnoticed, etc.

Some of the significant metrics while calculating the automated testing ROI are as follows:

  • The speed of the test execution. For instance, test duration and automated and manual test percentage.
  • Measuring the quality of the product. For instance, the unnoticed defect identification, mean time to detection of defects (MTTD), and overall quality of the build.
  • Cost analysis. For instance, software and hardware costs and the cost for defects prioritized by severity and operational costs.
  • Resource analysis. Like the requirement of new resources, cost of their training, billing, etc.

So, now that we’ve been briefed about the metrics, let’s discuss the most important topic—how to calculate ROI.

How to Calculate Automated Testing ROI

Although the process sounds complicated, in reality, it’s very simple. The formula to calculate ROI is to divide the net gain from the transition by the total investment required. The resources, tools used, and framework setup cost fall under the investment category. Calculate ROI using the following equation:

ROI for testing automation = (Investment value – Investment cost) / Investment cost

Now, let’s discuss the parameters required while executing this calculation.

Automating the Latest Tests

For automating new tests, it’s necessary to guess the cost and time required to develop, execute, and maintain the test. In this step, you should also decide which tests to automate and which ones to keep manual. Also, consider the hourly charge of every team member involved in the execution. Thus, you’ll find the total cost of automating the new test cases.

Automation of Older Tests

Regression testing makes sure that any new changes to the software don’t create a new bug in the existing modules. Thus comes the need for calculating the cost of automating the old test cases. To do that, follow the procedure we discussed in the previous section.

Handling All the Environments

You should make sure that the developed product works in different environments. If the end user can use your product only on a specific platform, then there’s less chance of a product’s success. While calculating ROI, consider the cost of setting up environments. For example, suppose you’re testing a website. Calculate the cost of setting up devices and browsers for cross-browser testing.

Reducing Defect Leakage

Defect leakage is the number of bugs that end up in the production because they weren’t handled properly in the development phase. It will result in various issues such as leakage cost, poor environment, etc. There is a very easy formula for calculating the cost of defect leakage:

Defect leakage = (X / Y – Z) * 100

Here’s a breakdown of this formula:

  • X is the defect count raised by the customer.
  • Y is the defect count that the tester raises before deployment.
  • Z is the number of invalid defects. This includes duplicate defects, known issues, etc.

Reusability of Tests

The main aim of keeping track of the reusability of tests is to avoid duplicating efforts. When you can reuse already created tests, then why build a new one? Calculate the time and effort saved by using reusable test cases.

Minimizing Leakage of Knowledge

For implementing a long-term ROI in automation testing, calculating the knowledge leakage cost is vital. Suppose an experienced test engineer leaves your company. The knowledge and experience regarding the testing framework or process are just lost. Even if you hire a new tester, it doesn’t matter how efficient they are. Picking up knowledge about how the testing process of your company works will take some time. To prevent that, ensure that you have documented test processes, setup guides, etc.

Best Practices for Improving Automated Testing ROI

All caught up with the “how”? Now let’s discuss fine-tuning the ROI calculation. These are some best practices for building a strong ROI:

  • It’s not necessary to automate everything. Few things are good when left manual. Start with easy and repetitive tests instead of the time-consuming and complex ones.
  • Don’t try to automate an application that’s not yet stable.
  • Are you going to execute both automated and manual test cases? Anticipate the time required to create and execute all the tests by the team members.
  • While calculating ROI, keep in mind that every test case will become a regression test in the future. It’s better to integrate the newer test cases with the already existing ones.
  • Testing the application across various environments and platforms takes time. Use parallel testing.
  • You should run smoke tests in parallel to finish most of the tests in a short time.
  • The sooner you start testing, the earlier you can uncover the defects. In the traditional waterfall model, where testing and development are done in separate phases, performing test automation early in the SDLC could be difficult. In the latest “shift left” process, even developers can run the tests. The overall goal of this approach is to minimize the cost by discovering bugs sooner, thus saving an impressive amount of time and money.
  • Use test case management tools, which will help in identifying redundant test cases faster.
  • Maintain proper documentation so that, when a resource is lost, the next engineer would be able to build it without wasting any time.

Common Mistakes While Calculating ROI

Even a supercomputer makes mistakes. Human beings are no exception. Test leads or QA managers tend to make some common mistakes while calculating ROI. Some of them are as follows.

Considering Only Automation Test Cases

Many scenarios require only manual test cases. This means you have to create, develop, and maintain the manual tests along with the automation tests. Visual UI testing is one of those scenarios. Check out this guide where you’ll get to know the things to consider while automating UI testing.

No Proper Sync Between the Team and the Automation Tool

Simply shifting to automation won’t work. Check if your team is ready for the transition. Do they have the required knowledge? If not, your effort and budget won’t be of much use. Train them in the latest test automation frameworks and make them aware of the best practices.

No Proper Test Maintenance

Once the tests are created and run, you have to continuously monitor, update, and maintain these tests. Maintenance is important to make sure that they’re still usable after a few months or years.

No Long-Term ROI Planning

When you’re planning for the transition to automation, don’t focus only on short-term benefits and investments. Also analyze how it will impact the company and the team in the long term.

Advanced ROI Calculation Techniques

Finally, we’ve covered all the basics. In this section, we’ll discuss two of the most advanced techniques in calculating the automated testing ROI: efficiency ROI calculation and risk reduction ROI calculation.

Efficiency ROI Calculation

In this approach, time investment gains take precedence over monetary gains. In manual testing, you have to consider the working hours of the tester (usually eight hours). On the other hand, an automation test suite can run all day long. Consider external disturbances, like hardware problems or the sudden absence of a tester. In this ROI calculation technique, the period of ROI is divided by 18 in the case of automation and divided by eight in the case of manual effort.

The below formula serves as the foundation for ROI calculation following this technique:

Investment = Automated test script development time + Automated test script execution time + Automated test analysis time + Automated test maintenance time + Manual test case execution time

Gain = Manual test execution time or analysis time * Total number of test cases (automation + manual) * Period of ROI / 8

In this technique, you have to assume things like the below:

  • Test automation completely replacing manual testing
  • Only one tester is considered for manual testing, etc.

Risk Reduction ROI Calculation

In this approach, you have to calculate the automation benefits independently. A company adopts automation testing to increase test coverage. As we know, manual testing might lead to many undiscovered bugs. The worst of them all are postproduction bugs. All those bugs finally point to poor testing quality. In the risk reduction technique, issues that the manual approach cannot handle are also covered. The monetary loss that a company faces by not implementing automation is the gain in the risk reduction technique.

You can calculate risk reduction ROI from the following formula:

ROI = (Reduction in monetary risk – Cost of risk control) / Cost of risk control

Reduction in risk can be calculated with this formula:

Reduction in risk = (Rate of annual occurrence) * (Expected loss in money at a single event) * (Reduction in risk occurrence probability after implementation of risk control)

Final Thoughts

There are many advantages that come with automation testing. You can execute manual testing only when the tester is at the system, whereas in automation testing, tests can run for 24 hours. This reduces the average cost of testing hours.

Various factors govern the calculation of automated testing ROI. Choose your testing tool wisely. Not only that, focus more time on the initial testing phase and adopt better reporting approaches. There’s no specific method for calculating the automated testing ROI. It depends on the tester or a company to choose a method that will suit their needs.

This post was written by Arnab Roy Chowdhury. Arnab is a UI developer by profession and a blogging enthusiast. He has strong expertise in the latest UI/UX trends, project methodologies, testing, and scripting.


For more information on the ROI of test automation, check out this webinar: Justifying (and Realizing) a Solid ROI on Test Automation.