Ways to calculate ROI

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Permalink Reply by Chandra Sekhar on January 21, 2010 at 10:59am

First put down your efforts with Manual Testing. how many Components/Modules needs to be tested and how often. By this you will come down to a cost based on (no of Man hours * Cost). Now prepare an estimation on which all components can be automated, Which can be made reusable components till the granular level of the application. How may times you need to run this test. Based on those inputs you can come to a conclusion on the Cost of using the Automation Tools. If you are able to cover the cost with Automation Tools over a period of time by reducing the manual resource cost then that automatically is your ROI.It is not worth to go for automation if it is just a one time manual testing activity and would take more time doing automation as it is not going to add any Value to the Project/client.

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Permalink Reply by Muhammad Abrar on January 21, 2010 at 12:25pm

Hope the attached template would be useful to calculate the ROI for automation.

Muhammad Abrar

Attachments:

• Automaiton ROI Template.xlsx, 11 KB

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Permalink Reply by Vijay Kalkundri on January 21, 2010 at 8:34pm

This is one of the very important question that is discusses on the day to day basis , how to we measure the

ROI from Automation. A question that makes a automation lead/manager scratch his head , to explain the stake

holders whats the ROI that the automation is providing.

I have heard of many ways and i would really love to hear of more ways to calculate the same. The following

are the ways that i can think of :

1) The time taken ( A very crude approach)
The time taken to execute the test cases manually to the time take to execute the same thru automation
If 10 TC'S manually take 10 mins and 10 TC's thru automation take 5 mins.
The ROI is directly 5 mins.

This cannot be a good approach as the time taken to execute may vary with the test engineer. The time taken

by automation may also vary by environment and the hardware that is used. The tool that is used to perform the

operation.

2) One more approach of calculating ROI is (Benifit)/ (Cost).
Benifit : Saving in terms of Continous execution.
Cost : Cost of acquiring license, training, script development, maintainance.

i have taken the formulae from 1 of the whitepaper:

Cost of automation = price of hardware + price of automation software + time to develop scripts + (time to maintain scripts x number of times scripts are executed) + (time to execute scripts x number of times scripts are executed)

price of hardware = 2 computers @ 1000$
price of automation software = 2 licenses at 2000$
time to develop scripts = 10 days @ $50 hr
time to maintain scripts x number of times scripts are executed = 10 days @ $50 hr
time to execute scripts x number of times scripts are executed = 1 hr @ $50 x 52 weeks
Cost of automation = $33,400

Cost of manual = time to develop test cases + (time to maintain test cases x number of times
tests are executed) + (time to execute manual testing x number of times tests
are executed)

time to develop test cases = 4 days @ $50 hr = $1,600
time to maintain test cases x number of times tests are executed day @ $50 x 26 weeks = $10,400
time to execute manual testing x number of times tests are executed = $41,600

Cost of manual =
ROI = benefit / cost
ROI = (cost of manual – cost of automation) / cost of automation
ROI = ($53,600 - $33,400) / $33,400
ROI = about 61% over the course of the year


I hope this brongs a bit of insight into the ROI calculation. There is no definite way , but we can say that the automation has to be part of the testing for over a period of time for the benefits to surface.

~ VVK

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