Calculating ROI for test automation is not a simple task. Investing in automation can be expensive, and success depends on many factors that are highly related to your specific business and QA requirements.
Everyone agrees that test automation brings proven benefits. Test automation can help to:
- Increase requirements or user story coverage;
- Release software faster and more frequently;
- Reduce the risk of finding defects in production;
- Reduce the effort and focus manual testing where it’s really necessary;
- Help detect defects earlier in the software development life cycle.
So if the benefits are clear, what's the issue? Challenges can arise when you submit a budget request for test automation software or service as the budget owner will consider every cost, including yours, based on how much money it will make or save the company.
Calculating ROI for your test automation strategy is fundamental to figuring out if this transition is worth the change and to comparing the suitable solution providers on the market. Before executing, or even thinking of building out an automation strategy, the very first thing you have to do is to calculate the net gain you’ll see from transitioning.
Copado (formerly Qualibrate) has helped QA organizations implement automated software testing for over ten years. This decade has shown that test automation can provide a relevant return on investment (ROI), as well as how to quantify the ROI to help present an effective business case for automation.
This article will guide you through the calculation of this figure to, eventually, provide an accurate result for your own business. You’ll gain an understanding of what ROI is, common mistakes QA managers fall into when calculating ROI, and the factors you need to take into consideration when calculating your ROI.
What is 'Return on Investment (ROI)'?
Return on Investment (ROI) is a measure of profitability that evaluates the performance of an initiative by dividing net benefits by net investment. Test automation ROI formula
As ROI is measured as a percentage, it can be easily compared with returns from other investments, allowing you to measure a variety of types of investments against one another.
Copado ROI calculator
The Copado ROI calculator makes it easy to calculate ROI. All you need to do is fill in the form with your own input and you will receive a full report with:
- ROI for year 1, year 2, and year 3
- Payback period
- Total savings
If you want to understand how this calculator was created, keep reading to learn every single factor to take into consideration and how it affects the final result.
Before analyzing the components of cost and investments, let’s look at the common mistakes people make when calculating ROI:
Consider automating 100% of your test cases.
Manual testing will always be important: some scenarios will always require manually executed test cases. This means you’ll still have to create, run, and maintain those tests.
How to choose what to automate then?
The benefit of test automation is proportional to how many times a given test can be repeated. Tests that are only performed a couple of times a year won’t bring you a positive ROI. The first candidates for test automation are tests that you run frequently and require a big amount of data to perform the same action. Or the most used functionality introduces high-risk conditions and also tests that take a lot of effort and time when manual testing.
- Not accounting for test maintenance.
As the business evolves and adjusts to customer and legal requirements, the test cases also have to be updated to reflect these changes. Hence why, after creating and implementing your automation strategy, you will need to continuously maintain and update your tests. As you build new features and continue to make product improvements, your test cases and regression suites will grow. Ensuring these are usable over months or years will require continuous maintenance.
- Not taking into consideration the extra benefits of test automation.
There are some extra benefits when implementing a test automation strategy that are hard to calculate. However, it is always good to have them in mind as intangible gains:
- Not depending on expertise: with the help of a friendly test automation provider, like Copado, anyone can create and run test scripts. That means you won’t need to rely on long and difficult lines of code and tester expertise. You just need to make sure to create a strong basis for your test automation strategy to be stress-free, even when your best tester leaves the company.
- Reduced project slippage and faster time to market: with a good QA strategy and the support of test automation, you will be able to quickly deliver more releases per year and avoid annoying project delays due to bugs. If you are in a very competitive sector, being able to be the first on the market will give you a strategic advantage over competitors.
- Team morale increases: executing repetitive, manual test cases can be frustrating. Leveraging test automation gives your team time to spend on more challenging and rewarding projects.
Savings - factors
Let’s see, in practice, how to calculate the savings:
1) Time saved for regression testing
Regression testing is fundamental for the success of your QA activity, as it will help you ensure that your application is bug-free and that previously validated product features continue to work properly.
Over time, the number of test cases to run will grow and take longer to execute. By implementing test automation, you will save time spent testing. With Copado, releases take hours instead of weeks, as you can see here in this business case.
To come up with how much you save, you need to consider the following key variables unique to your organization before getting started:
- Business processes in scope, including variants.
Business processes are the end-to-end scenarios you run in your application. The more business processes you have, the more you will save. You should consider that, by growing your business and adding a new feature to your product, your business processes will increase in scope over time. Typically, test automation will make sense for you if you have at least 50 business processes.
- Test automation coverage (%).
As previously mentioned, this percentage highly depends on your business type. Consider the tests that you want to keep manual and the ones that are not worth automating to come up with the percentage of test automation coverage for all your business processes.
- Releases per year.
The more releases you have, the more you’ll save with test automation. On average, if you release at least 4 times a year, test automation can make a great impact.
- Test cycles per release, including retesting for defects.
How many test cycles do you run per release? Consider at least two in case you detect any bugs, even small ones, or if you make any changes, even slight ones.
- The number of processes impacted during a release (%).
Are your business processes highly dependent on one another? Are the functionalities you release affecting the already existing functionalities? If that’s the case, the percentage will be high and you’ll most benefit from test automation. A reasonable percentage of impact, based on our experience, is usually between 5 and 35%.
- Cost of tester per hour.
This is another figure which makes the difference in your overall result. If you have highly skilled testers, you will greatly save with test automation. After implementing test automation, you can have employees create and run regression tests, depending on the user expertise required for the test tool you’ve chosen. With Copado, no coding skills are required. This means that you can have your best-skilled testers focus on manual testing critical functionalities.
- Average time to create, execute and maintain a manual test
With test automation, you can reduce 80% or more of the time spent on manual testing. The more it takes to execute a manual test, the more you will be able to save.
All you have to do is apply the formula to the current scenario, the cost for manual testing, and take off the cost for test automation.
The time to create and maintain an automated test case highly depends on your business process and on the tool you are using. If you want to create a proper test case, which requires low maintenance, it will usually take the same time as creating it manually. What you’ll save is maintenance time, which will be pretty low, and the entire time for execution, as the test will run automatically.
Don’t forget to take into consideration that not all your business processes will be automated. Make sure you only apply test automation to the percentage of desired coverage.
2) Time saved for documentation and training
Don’t forget that you can benefit from implementing test automation tools in other, often underestimated, time-consuming activities. That’s the case with Copado: while recording your business processes, user actions and input data in the cloud, you can use the stored information to create business process documentation and end-user training.
To calculate how much you save you will need to know the:
- Cost of the business analyst, who usually creates documentation
- Cost of the training manager, who provides the onboarding manuals for new users
- Time to create and maintain documentation and training for business processes
You can apply the same formula used for testing. For documentation and training, you will only need to consider the time to create and the time to maintain.
3) Reduction of risk and remediation costs
The biggest ROI of automated testing is the reduction of risk and remediation costs.
With test automation, you will be able to hit a test coverage close to 100% and lower the risk of introducing a defect in the production environment. You will be able to find hidden defects earlier in the life cycle that you otherwise would have only found in production, causing business disruption.
Business disruption means a loss. This loss needs to be considered in the ROI formula for test automation: we will calculate the gain in terms of money if a bug is discovered post-delivery/implementation. So, in this case, the gain is the loss the company could face if automation testing was not implemented.
As you can imagine this is a figure that highly depends on your own business. Think of Amazon, or Booking: what would happen if their systems were not working, even for a few minutes, and people from all over the world were not able to buy anything on these two platforms? And how about banks, financial institutions, cryptocurrency trading platforms, or ad networks? Introducing bugs into production would mean a big loss of money and, most of all, credibility and trust.
Reaching a test coverage of nearly 100% with test automation means that you significantly lower the risk that this happens. How do we calculate this “loss” gain then? These are the questions you have to reply to first:
- What defines risk in your company? For instance, a bank’s customer-facing application for conducting transactions cannot go offline for any significant period and must have rigid security protections.
- How many people will be affected by a platform issue?
- What is the likelihood of worst-case scenarios happening?
- What is the potential market loss of application downtime?
- What is the potential impact in the case of buggy software that annoys customers?
Investment - factors
1) Tool license
The license cost is the most impactful investment. The vendors have different subscription plans. Make sure you don’t submit a long-life subscription. There is an increasing number of automated testing tools available on the market today, and choosing the one that is right for you can be difficult: check this guide we created to help you choose.
2) Resources for installation and configuration
When comparing the tools, make sure you are also aware of the time required for installation. There are some well-known solutions on the market requiring huge downloads and frequent updates.
Another important factor to be considered as an investment is the learning curve. How long does it take for your team to get familiar with the tool? How long will it take your team to fully ramp up and be comfortable executing tests with the product? Is it an easy-to-use tool for everyone, or will some team members need additional training?
Some automated testing tools rely heavily on scripting tests. Copado is not a complex solution. All you have to do is to log in with your credentials to be able to automate a business process in minutes with Copado’s friendly, no-code UI. Using Copado, a customer in New Zealand was able to execute their first end-to-end regression cycle only after 3 weeks of starting from scratch.
To summarize, let’s see the initial formula again.
- SAVINGS: savings in testing + savings in risk reduction and remediation costs
- INVESTMENT: tool license + installation and configuration
Are you still struggling?
It’s crucial to calculate ROI for your test automation strategy. If you are not sure about the result you came up with, you can still double-check it by filling out our calculator or contacting us. We will be more than happy to help you and share with you our expertise.