Calculating and Optimizing Test Automation ROI

Posted On: 19 June 2024

The popularity of Agile and DevOps practices and AI's rapid adoption in businesses is driving the test automation market. The market size for automation testing worldwide is expected to reach $69.85 billion by 2032 from $17.71 billion in 2024. With test automation gaining so much importance in benefits and companies willing to spend huge amounts, it makes sense for businesses to calculate the test automation ROI before making a decision. Let’s understand the factors that impact automated testing ROI, how to calculate it, and best practices to optimize it.

Automated Testing ROI: Dependent Factors
Test Automation ROI Calculator
Calculating Efficiency of Test Automation ROI
Test Automation ROI Best Practices
Factoring Intangible Benefits
Conclusion

Automated Testing ROI: Dependent Factors

Test automation ROI is dependent on various factors including:

1. Upfront Investments: It is the initial capital you would need to purchase licenses, installation, and training for the test automation tools.

2. Time: Automated testing is faster than manual testing. It also helps you detect bugs and issues quickly, helping you fix them early in the SDLC.

3. Reduction in Labor: Test automation is a game-changer in reducing manual labor. This can help you to utilize your resources optimally.

4. Comprehensive Coverage: Automated testing allows your team to create and execute numerous test cases across scenarios, environments, and platforms. As many times as you need. A rigorous and comprehensive coverage ensures that potential bugs and issues are detected and fixed earlier in the development cycle.

5. Higher Test Accuracy: Automated testing runs desired tests consistently and eliminates errors that could occur in manual processes. This helps in increasing the testing accuracy.

Test Automation ROI Calculator:

Key Metrics to Consider When Calculating ROI for Test Automation

It is helpful to select key metrics that you would need to calculate test automation ROI -

1. Cost: This includes -

License fees as well as installation or training costs.
Estimated expenses for maintaining the tools.
Money spent on salaries, training, and overhead.
Expenses on hardware and cloud infrastructure.
Expenses on any additional tools or plugins.

2. Measurable Benefits:

Time Savings: Time saved in automated testing vis a vis manual testing.
Shorter development time: Time saved in testing, resulting in shorter development time.
Savings in man hours: The number of man-hours saved by automation.

Calculate the financial impact of the time saved above. You can assign an average hourly cost to the abovementioned benefits.

The Formula for Calculating Automated Testing ROI with Example:

The formula for calculating automated testing ROI is:

ROI = (Total Measurable Benefits / Costs) × 100

A company invests $50,000 in test automation and experiences the following benefits (in money value) annually:

Time saved (Calculated by assigning an average hourly cost to the number of hours saved through automated testing compared to manual testing.): $30,000
Savings in the manual labor: $20,000
Savings in development time: $50,000
Total Benefits = $30,000 + $20,000 + $50,000 = $100,000

Using the ROI formula:

ROI = ( 100,000 / 50,000 ) × 100 = 200%

This means by automating your testing process, your company is gaining $2 for every dollar spent.

Calculating Efficiency of Test Automation ROI

We will utilize the provided methodologies while considering the associated factors to assess test automation's Return on Investment (ROI) efficiency. The Period of ROI is the time (in weeks) for which the ROI is to be calculated. It is divided by 8 in cases of manual effort and by 18 where automation comes into the picture. This is because automated tests can run continuously for 18 to 20 hours, whereas manual testers cannot be expected to work more than 8 hours a day.

The slightly reduced hours for automated tests account for potential interruptions or pauses that may occur for various reasons. For our calculations, we’re assuming automated tests to run for 18 hours and manual testing for 8 hours.

1. Development Time for Automated Test Scripts:

Determine the time allocated for crafting automated test scripts.
Formula: “(Hourly time devoted to automation per test * Total number of automated test cases) / 8”

2. Execution Time for Automated Test Scripts:

Assess the duration spent on executing automated test scripts.
Formula: “(Time taken for executing each automated test * Total number of automated test cases * Period of ROI) / 18” (adjusted to accommodate interruptions)

3. Analysis Time for Automated Tests:

Calculate the time invested in assessing the outcomes.
Formula: “(Time for analyzing tests * Period of ROI) / 8”

4. Maintenance Time for Automated Tests:

Compute the time dedicated to maintaining automated test scripts.
Formula: “(Time allocated for maintenance * Period of ROI) / 8”

5. Manual Testing Execution Time:

Evaluate the time spent on manually executing tests.
Formula: “(Time for manual test execution * Total number of manual test cases * Period of ROI) / 8”

The Period of ROI (measured in weeks), used in the above formulas is the time duration for which the ROI is being calculated. This period is divided by 8 when considering the manual effort and 18 when automation is involved.

Once these components are computed, aggregate them to determine the total duration expended on both manual and automated testing.

Remember to acknowledge the assumptions and constraints inherent in this methodology, like the presumption of complete substitution of manual testing with automation and the assumption of a solitary tester for manual testing. These considerations should inform the interpretation of results and decision-making based on the test automation ROI calculator.

Test Automation ROI Best Practices:

Following best practices can help your business maximize the ROI:

1. Align your test automation goals with the business goals. Remember your product strategy, roadmap, etc., while building the testing environment.

2. Conduct thorough research and compare tools to find the best tools for your needs. Scalability, compatibility with existing systems, ease of integration, vendor support, etc, must be some of the key considerations while selecting the test automation tools.

4. Set clear metrics to evaluate the ROI. Regularly monitor these metrics to find areas for improvement and take follow-up actions.

5. Implement Incrementally. Use small pilot projects to gain experience, identify challenges, and fine-tune processes before scaling them.

Factoring Intangible Benefits:

Intangible or qualitative benefits play an important role in understanding the overall value proposition of test automation and then making an informed choice. Some of the key intangible benefits worth considering are -

1. Employee Motivation: Repetitive tasks impact the motivation of the employees. Automation helps you engage your members in more challenging work, increasing job satisfaction.

2. User Satisfaction: Automated testing ensures that all the bugs are identified and fixed in the software before release. A bug-free software leads to a good user experience and enhanced customer satisfaction.

3. Fast Development Time: Fast development time will allow your business to tap market opportunities, get ahead of the competition, and swiftly respond to evolving market trends.

Conclusion

Calculating ROI is an important step in the test automation journey. Following the above-mentioned test automation ROI best practices can help you extract maximum gains from it. ACCELQ, our test automation platform, can help you achieve significantly higher ROI. The codeless AI platform has delivered as high as 7.5x productivity and over 72% savings to businesses. Get your ACCELQ demo and enhance your test automation strategy.

Balbodh Jha

Associate Director Product Engineering

Balbodh is a passionate enthusiast of Test Automation, constantly seeking opportunities to tackle real-world challenges in this field. He possesses an insatiable curiosity for engaging in discussions on testing-related topics and crafting solutions to address them. He has a wealth of experience in establishing Test Centers of Excellence (TCoE) for a diverse range of clients he has collaborated with.