Software Outsourcing: Total Cost of Engagement

Hourly rates are important to consider but the Total Cost of Engagement, or TCE, is important for your budgeting process. The TCE is a complex cost factor separate from compensation or hourly rate. When hiring your own developers in-house, for instance, TCE includes a base hourly rate, plus taxes, healthcare, retirement plans, vacation, etc. Comparatively, when you outsource, many of the in-house costs disappear, but it's important to be mindful of other costs you may not consider right away.

For instance, an offshore developer in a remote part of Southeast Asia might quote you an amazing rate, but management and travel costs should be added to the TCE. Most outsourcing experts suggest that the TCE can be as high as 30% on top of your budget, so it’s important to consider the costs when making an outsourcing decision.