As many of you probably experience in real life, financial justification is often needed before purchasing new software or services. Depending on the organization and the size of the purchase, this justification can vary from a statement about how it will help you do your job better, to a full three-year business case.
In the webinar, I start by showing the basic ROI calculation and showing how it can easily be manipulated. From there, we discussed some alternative financial models including net present value (NPV), internal rate of return (IRR), and payback period, that are more appropriate for multiple year projects.
We then shifted the discussion to different types of benefits and costs that can be expected from test automation projects. Some of these, like labor savings, are considered “hard” or tangible. Others are more difficult to calculate, like the benefits of higher quality software, and can be labeled “soft” or intangible. I suggest that you start by trying to build your financial justification only using hard, quantifiable benefits. Soft benefits can be seen as theoretical or unobtainable by some financial approvers and derail conversations.
For soft benefits and costs, I recommend that you take a story-based approach. Discuss how they impact the business both in terms of rational and emotional effects. I provide an example of how this can be done in the webinar.
Lastly, we discussed the free ROI tool and how to use it. Feel free to download the spreadsheet and manipulate the inputs as best fit your organization. The spreadsheet was built using best-practice metrics we’ve learned from our Testim clients, but every organization is different, so you will want to customize it to your liking. And, if you like it, use it for other projects as well. Many of the concepts and general structure are repeated in similar software or service acquisitions.
Enjoy, and if you have any questions, you can reach me at ShawnJ@testim.io