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What is the best way to create a test automation suite as a service

I am trying to create the following setup :
A Selenium (Java) project that has a set of 10 automated test cases.
When this project is executed, it generates an HTML test execution report.
This project should be 'hosted' on an internal network.
Anyone who has access to the network should be able to 'invoke' this project, which in turn executes the test cases and passes the HTML report to the person who invoked it.
The project should be accessible ONLY for execution and the code should NOT be accessible.
My goal is that this implementation should be executable by any framework irrespective of the technology that the framework uses. I was thinking of creating the project as a WebService using Java (servlet).
My question is:
Can this implementation be accessed by any external automation framework ?
Are there any limitations to this implementation?
Is there a better way to implement this requirement?
Thanks in advance.

You can create a maven project and have your automated tests under maven test folder.Configure your tests to run through POM.xml(use maven surefire plugin).Configure a jenkins job to run the maven test.Anybody with access the jenkins can build/run this task!
Below link should give you a headstart
http://learn-automation.com/selenium-integration-with-jenkins/

As a matter of fact, it is something we did on one of our projects. As I cannot share specifics, I will give you overall architectural view of the project.
The core of all things was a service that could run JUnit tests on requests. It was a Soap web-service, but nothing stops you from making it REST. To implement this you need to implement your version of JUnit test runners (see for example: http://www.mscharhag.com/java/understanding-junits-runner-architecture or https://github.com/junit-team/junit4/wiki/Test-runners)
If you use JUnit as test framework for running your Selenuim tests this may be a great solution for you - JUnit will generate HTML reports for you if you configure it properly, it will hide actual test suite implementation from users and run test suite on demand. This solution is also great because it operates on JUnit level and does not care about what kind of tests it actually runs, so it can be also reused for any other kind of automated tests.
So to answer all your questions:
Can this implementation be accessed by any external automation
framework ? -> yes, it can be accessed by anybody who able send http
requests
Are there any limitations to this implementation? -> none that I am
aware of
Is there a better way to implement this requirement? -> well, I
didn't actually work with TestNG much so I don't know if it is
easier or more difficult to do it on Junit level. You can use
Jenkins or other CI tool as well to achieve same results - they can
run JUnit tests for you and almost always have API ready for this,
although those APIs may be not perfect.
So I'd say that if you need this only for one thing you can use CI tools for this purpose, if you don't have CI tools available then choice has been made for you. However, from our experience, having this kind of service was a great asset for a company and I really wonder why there's no such products available elsewhere yet.

Run code before arquillian deployment

I am writing integration tests for a Java EE Servlet using Arquillian + JUnit. I need to be able to execute code before the server launches.
So is it possible to execute code before #Deployment? I tried #BeforeClass with no luck.
The reason I need to do this, is because trust and keystores for ssl needs to exists before the server starts. I am creating the stores problematically and is saving them to files afterwards.
I know a possible workaround would be to have static trust and keystores, but I prefer to create them programmatically before the test starts for full flexibility when writing tests.

There is not really a need to have your own specialization of Arquillian JUnit runner. This solution would be only for JUnit 4.x in that case which you are using for writing your tests.
Arquillian let you hook through extensions mechanism to its runtime and this way you can have some custom logic executed before server startup to provide your keystores. I believe this is more elegant and portable solution.
Please have a look at sample extensions on Github (especially lifecycle would be a good starting point). If you feel like implementing it this way I'm more than happy to help you. The event you might want to observe on is either BeforeSetup or BeforeStart.

You have two other options for executing code before and after your test:
Rules or ClassRules are executed around and before/after
Using a custom Testrunner (extending the default 'Arquillian' runner)
But as the static deployment method is not invoked by a rule, I assume you have to go for the testrunner.

Automating complete testing of Java EE web application

I have a doubt. Say I have a web application which is big and relies on Java/Java EE (JSP/Servlets).
Every time before a drop we test each and every functionality on GUI so that everything is working properly. Previously it was easy but now as the number of modules has increased exponentially, manually testing each and every GUI with required functionality is no more a feasible option.
I am on lookout for tools in which I can write my entire test case say about 1000 and then just run it once before the drop and it will list down all the test cases that have failed.
The tool preferably must be free to download and use it.
I dont know whether using
Arquilian
or
JUnit
in this regard will help or not but automating testing before the drop is really needed..
Please guide.

Use Junit together with a mock framework i.e Mockito to test units (service methods)
Use Arquillian to test on an integration level ( how different services, modules work together )
Use a database testing tool (i.e dbunit) to test your database / persistence layer)
Use Selenium to test your frontend
Test as much as possible.
Use Jenkins and Sonar to track your build process and your quality of tests and code
You should always test your application on different level. There is not just one solution.
Use unit testing to test small pieces of your application and to make refactoring as easy as possible.
Use integration test to check your modules still work together as expected.
Use GUI testing to check if your customers can work with your software.
If its relevant, think about performance testing (i.e. jmeter )

Definitively Selenium. Couple it with maven cause you will probably need to package your project specifically for testing purpose. Moreover maven allow you to launch a container during the integration-test phase and to close it automatically at the end. You can also configure this as a nightly build on jenkins / hudson so you will be quicly notified of any regression.

Is there any general integration test framework for console java application?

For example, I am going to write an application. Its core requirement is simple. It keeps scanning a folder. If new files arrive, it will transfer it to a FTP site. It will be written in JAVA as a console application.
I am wondering if there is integration test framework, like open source one, for this kind of application? It should be capable of testing the following sameple test cases.
Generate files, then check if these files are transferred to FTP.
If FTP is down, can the application report corresponding warning logs?
etc.
Thanks in advance.

JUnit combined with some mocking framework, like Mockito should get you a fair bit on your way. If you want to take it further, for instance having actual instances running of external service, you can use JUnit combined with, for instance, Cargo to start up Java EE containers as part of your test. Light-weight, in-memory databases like HSQLDB is often used as placeholder databases for integration tests.
I've heard some people using JBoss Arquillian, but haven't tried it myself. It's more for remote testing of Java EE components though, so might not fit your exact requirement.

Run JUnit Tests through web page

We would like to have a set of tests as part of our web application. The tests will be used for analyzing the health status of the application, so a support person or a scheduler can run the test to see if the application itself and various required remote systems are available.
I have seen this being done using some kind of webbased JUnit frontend, it allowed to run tests and reported the results as HTML. This would be great because the developers know JUnit, but I couldn't find the library in the intertubes.
Where can I find a library doing this?

You can use some free services to verify the availability of your system. Here are two that I've used:
mon.itor.us
pingdom
Another thing you can take a look at is JMeter, but it does not have a web UI.
Original answer:
Perhaps you mean functional tests (that can be run through JUnit). Take a look at
Selenium - it's web functional testing tool.
(Note that these are not unit tests. They don't test individual units of the code. Furthermore unit tests are executed at build time, not at runtime.)

Bozho is correct, these are not unit tests but I have done something similar. At my company I am not the one that ultimately deploys these things to our test environment or production environment. During development I create a couple of servlets that test things like it can get a valid database connection, it can hit our AD server etc. It than basically prints out a message and indicates success or failure.
That way when I have the code deployed to one of our environments, I can have the person deploying it hit the URL and make sure everything comes back OK. When I get ready to do the final deployment I just remove the servlet config.

If you already have a set of tests composed and ready to run, then Hudson can run those tests on a schedule and report on the results.

Update: If you're looking for a tool to check your servers and applications every few minutes for availability check out Nagios.
Maybe you mean some kind of acceptance test tool. If so, have a look at Fitnesse.

What you're probably looking for is CruiseControl.Net - it combines with NUnit/JUnit etc to make an automated testing framework with HTML reporting tools and a tray app for your desktop as well. I actually just downloaded it again an hour ago for a new role - it's really good.
It can be used to run anything from unit tests to getting files from source control, to kicking off compiler builds or rebooting servers (when used with NAnt - a .Net build tool).

You should look for a Continous Integration tool like Jenkin.