Budgeting Test Automation Projects for the New Year: Focus on ROI

It’s a new year—that means new objectives, new budgets, and new projects.  If you’re like most QA departments, chances are you’re looking into test automation.  But while the value to your department is obvious, how do you state the best financial case to secure upper management’s buy-in?

Think about it: how many things at your job drive you crazy? Wouldn’t it be nice to fix just one?
Well, there’s no better resolution you can make than improving your software quality. 

Don’t you just love the start of the New Year?

For most of us, the beginning of January marks the end of a long holiday hiatus.  Whether you’ve spent your holiday relaxing at home or enjoying the end-of-the-year slowdown at your office, the last weeks of December offer a welcome respite.  By the time we return, we’re rested, refreshed, and ready to get back to work. 

If the rest of the year is a grind, January is a time of renewal.  As employees return with renewed energy and focus, the same can be said for a lot of the companies they work for as well.  Freed from the shackles of the previous year’s funding, it’s the time of new objectives, new projects, and new budgets.  Got a problem that you’ve been trying to fix?  An improvement you’ve been dying to make?  Now’s the time to pitch it. 

And when it comes to QA departments, you’ll find one project appearing on a lot of wish lists: test automation.

Intuitively, it makes sense that test automation is so popular: by eliminating the prodigious quantity of SME hours required for testing complex systems (especially custom implementations of ERP systems like Oracle EBS), it scratches an itch that nags almost all enterprise-level companies.  But while that value can easily be seen in IT, they’re not the people who need to be sold.  It’s the folks who control the purse strings that make the final decision—and they’ll be judging your pitch on two criteria:

  1. Does the project align with our company’s strategy?
  2. Is it financially viable?

Now, while the first question is probably out of your hands, the second is not.  And, luckily for you, test automation has an ironclad ROI for most enterprise-level companies. 

Granted, merely rattling off numbers is easy.  If you really want to sell it, you’ll need to delve a little deeper.  Providing metrics like a 5-year NPV (the net present value of the expected expenses and returns of the project after 5 years) and 5-year IRR (the internal rate of return of the investment—indicating its quality or yield) can help you plot out an expected year-over-year summary of the investment’s cash flows as well as its break-even point (18 months is generally accepted as the cutoff for a reasonable break-even point, so you may face an uphill battle if you can’t make that). 

If you’re looking for more detail, check out our test automation ROI calculator, it provides 5-year NPV and IRR estimates as well as an expected break-even point.  If you’re serious about test automation, it’s a great place to start.  Even if your department’s budget has already been locked-in for 2015, it’s still worth taking a look—the short payback period might surprise you.  After all, why not consider a project that can pay for itself within a year?

Sure, focusing on a project’s return-on-investment may seem a little obvious, but its sheer importance makes it a fact worth repeating.  While test automation may be important to your department, it is merely a drop in the ocean of other requests that are being made across the whole of the company.  And, unfortunately, the financial executives who have the final say on your project’s future aren’t that sentimental.  They can’t fund everything, so it’s worth taking the time to build a stellar financial case—in the end, it could make all the difference.

It’s a new year, after all.  Anything’s possible.


Mike Hodge
Lighthouse Technologies, Inc
Software Testing | Quality Assurance Consulting | Oracle EBS Consulting

{ 0 comments… add one }

Leave a Comment

PMIASQIEEESoftware Engineering InstituteInternational Software Testing Qualifications Board