Offshore vs in-house developer cost: how to compare properly.

Why headline comparisons mislead

A common mistake is to set an in-house salary beside an offshore monthly fee and call the gap the saving. That compares a partial cost with a fuller one. An in-house hire carries costs beyond pay, and an offshore pod carries costs that sit on your side of the fence. A useful comparison counts both completely.

We do not quote figures here, because your numbers depend on your market, your role definitions and your seniority needs. What follows is how to build a model you can trust with your own inputs.

Cost lines for an in-house hire

• Salary and any bonus or commission.
• Employer taxes, statutory contributions and benefits: pension, health cover, leave, insurance.
• Recruiting: agency fees or internal recruiter time, job adverts, interview hours from your senior staff.
• Ramp-up: the months before a new hire is fully productive, during which you pay in full.
• Equipment and software seats: laptop, peripherals, licences, development tools, cloud sandboxes.
• Overheads: office space, utilities, IT support, HR administration, payroll.
• Management time: the hours your leads spend on one-to-ones, reviews and coordination.
• Training and development to keep skills current.
• Attrition: the cost of a leaver, which combines a vacancy, a new recruiting round and another ramp-up.
• Compliance and employment risk including notice periods and severance obligations.

Cost lines for an offshore pod

• The engagement fee for the pod, however it is structured: per person, per pod or per project.
• Your management and oversight time: product ownership, reviews, planning, technical direction. It is smaller when the partner supplies a capable lead, but it is never zero.
• Onboarding: documentation, environment setup and knowledge transfer in the early weeks.
• Tooling and access: seats on your project, code and communication tools that you provide.
• Communication overhead: meetings scheduled around a time-zone difference, written briefs, handovers.
• Travel for occasional planning sessions, if you choose to have them.
• Legal, contract and security work: NDA, IP assignment, data-handling review, vendor assessment.
• Transition cost if you later bring the work in-house or change partner.

Ask the partner what is included in the fee. Items like QA, project leadership and tooling are sometimes in, sometimes out. The software engineering service describes the models Missan offers, so you can match them to your own list.

Model it in a simple spreadsheet

1. Define the scope. Same roles, same output, same period. Compare like with like.
2. Make one column per option and one row per cost line from the lists above.
3. Mark each input as known, estimated or guessed. Colour them differently. Honest uncertainty is more useful than false precision.
4. Add time. Show year one separately from later years, so recruiting, ramp-up and onboarding appear where they happen.
5. Add output assumptions. State how much productive work you expect from each option in the ramp-up months and afterwards.
6. Run three cases: cautious, expected and optimistic, changing the shakiest inputs only.
7. Read the sensitivity. See which two or three inputs move the answer most, and put your effort into checking those.

If you want a starting point before you build your own, the offshore cost calculator gives a quick first view you can then replace with your own figures.

Pitfalls to avoid

• Hidden costs. Management time and attrition are the two most often left out, and both are real. Put a value on them even if it is rough.
• Optimistic productivity. Do not assume an offshore pod performs at full speed on day one, or that an in-house hire does. Both ramp up.
• Unequal scope. If the pod includes QA and leadership and the in-house line is one developer, you are comparing different things.
• Ignoring quality and rework. A cheaper option that produces more rework is not cheaper. Include a rework allowance on both sides.
• Ignoring flexibility. A pod can often be scaled up or down more quickly than headcount. That has value, though only if you expect your needs to change.
• Forgetting control and risk. Ownership of code, access and exit terms affect the true cost of an arrangement. Our guide to running an offshore engineering team covers these.

Questions to put to your own numbers

Once the spreadsheet is built, use it to ask questions rather than to defend a conclusion:

• If the offshore pod needed twice the oversight time we assumed, would the answer change?
• If an in-house hire left after their first year, how much of the saving or cost would that wipe out?
• How long can we afford a vacancy while recruiting, and what does the roadmap lose in that time?
• Is the need steady, or will it fall away after a specific project?
• Do we have a technical lead who can direct a remote team today, or would that role also need to be hired?

If the answer holds under pressure, you can present it with confidence. If it flips on one assumption, you have learned where to focus your enquiries.

Make the decision with a pilot

A model gives you a hypothesis. A small pilot tests it with real work: a bounded project, a review date and agreed measures of quality and delivery. Compare the pilot's actual cost and output to your spreadsheet and adjust.

Missan Technology Solutions is the India company of the Missan group, engineering and IT services since 2004. We are happy to work through your cost lines with you and propose a pilot that fits.

Questions people ask

Related services

• Offshore cost calculator
• Offshore software engineering
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