"How much will we save with an offshore team?" Finance wants a number. Engineering wants assurance that quality will not suffer. Both deserve a more rigorous answer than comparing average salaries.
This guide gives you a framework to compare offshore vs onshore software development cost honestly.
Both deserve a more rigorous answer than comparing average salaries.
Why is salary comparison misleading?
Base salary is only part of what an engineer costs. Benefits, taxes, equipment, office space, recruiting fees, management time and the cost of empty seats all add up, in both domestic and offshore models. Productivity and attrition also differ by team design, not just by location.
What goes into total cost of ownership?
Total cost of ownership components for engineers
Illustration in progress
| Cost component | Domestic in-house | Offshore via partner |
|---|---|---|
| Base salary | Local market rate | Local market rate in offshore region |
| Benefits and payroll taxes | Employer contributions | Included in partner fee |
| Recruiting | Agency fees or recruiter time | Usually included |
| Onboarding and ramp-up | Internal time | Shared; partner supports |
| Equipment and facilities | Laptops, office, software | Usually included (except your licences) |
| Management overhead | Engineering managers | Your leaders plus partner operations |
| Attrition cost | Rehiring and lost context | Mitigated by partner retention programmes |
| Travel and integration | Minimal | Periodic visits |
| Partner margin | None | Included in fee |
How do you calculate a fair comparison?
- Calculate fully loaded domestic cost per engineer: salary, benefits, taxes, equipment, facilities, recruiting amortised over expected tenure.
- Get an all-inclusive offshore rate for the same seniority and skills.
- Add integration costs: travel, additional management time, tools.
- Factor attrition: expected annual attrition × cost per replacement (hiring, onboarding, lost productivity).
- Adjust for time-to-hire: months of an empty seat have a cost in delayed delivery.
- Compare over three to five years, not one.
Simple TCO formula
Annual TCO per engineer = Fully loaded compensation + (Recruiting cost ÷ expected tenure in years) + Equipment and facilities + Management overhead share + (Attrition rate × replacement cost)
Engineering team TCO formula
Illustration in progress
Use the same formula for both models with your real numbers.
What affects offshore productivity?
- Seniority: senior engineers need less supervision and produce higher quality.
- Integration: teams in your processes and code review perform like your home teams.
- Ownership: teams that own services deliver more than teams given isolated tickets.
- Time-zone design: a fixed overlap window prevents delays.
- Retention: context built over years drives speed. See retention practices.
Where do offshore teams save the most?
- Scaling platform, DevOps and cloud infrastructure teams
- Building data and AI/ML capacity in competitive domestic markets
- Adding QA and security engineering capacity
- Providing 24/7 operations coverage without night shifts at home
When might domestic hiring be the better option?
- Roles requiring daily in-person customer interaction
- Very small teams where coordination overhead dominates
- Regulatory requirements that restrict where work can be done
- Leadership roles that must sit with headquarters
How Crozaint approaches cost
Crozaint positions its engineering centres as competitive with domestic senior hiring, with the benefits of senior engineers hired within weeks, no lock-in and flexible scaling. You choose between Managed Operation and Build-Operate-Transfer, interview and approve every hire, and see retention and SLA metrics (including 98% on-time SLA compliance) as part of governance.
We build a cost model with you during the 1–2 week Scope step, using your actual roles and alternatives.
Common mistakes to avoid
- Comparing base salaries instead of total cost
- Ignoring attrition and time-to-hire
- Hiring junior offshore engineers to hit a cost target
- Forgetting integration and travel costs
- Evaluating over one year instead of three to five
Conclusion
The right comparison is total cost of ownership over several years, adjusted for seniority, attrition and integration. Run the numbers honestly and the decision usually becomes clear.
Want a cost model for your team? Scope your engineering centre with Crozaint.
