In-house vs outsourced cost. The Outsourcing Savings Calculator takes annual in-house cost (salaries, tools, overhead), annual outsourced cost, one-off transition cost, years to compare and returns total saving over the period plus annual saving, saving as a share of in-house cost, months to recover the transition cost. Results update as you type, and the formula is shown under the result so you can repeat it in your own spreadsheet.
Operational metrics turn time and capacity into money. Small improvements in utilisation, cycle time or defect rate compound across every unit produced, so measure them regularly. Use the worked example below to check the maths against your own figures.
How the Outsourcing Savings Calculator works
Outsourcing saves money when the provider's price beats your fully loaded internal cost and the switch does not disrupt service. Include management time on both sides.
Worked example
With the example values (annual in-house cost (salaries, tools, overhead) of $80,000, annual outsourced cost of $55,000, one-off transition cost of $5,000, years to compare of 3 years), the total saving over the period is $70,000.00; annual saving $25,000.00, saving as a share of in-house cost 31.25%, months to recover the transition cost 2 months. Change any figure above and the result updates immediately; use Copy results to paste the summary into a note or email.
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Frequently Asked Questions
How is total saving over the period calculated?
saving = (in-house cost − outsourced cost) × years − transition cost.
Which figures do I need?
Annual in-house cost (salaries, tools, overhead), annual outsourced cost, one-off transition cost, years to compare. Take them from the same period and the same set of accounts or reports so the ratio is consistent, and check the example values as a guide to the units expected.
How do I use this in practice?
Measure the metric for a normal week, set a target, change one thing, and measure again. Operational gains come from many small, verified improvements.
