Business
Outsourcing Cost Comparison Calculator
Compare fully loaded internal cost with vendor fixed and variable charges, horizon totals, recurring savings, cost difference, and transition payback. Review a dedicated cost comparison, contract caveats, examples, and FAQs.
Internal monthly delivery cost-
Vendor recurring monthly cost-
Internal cost through horizon-
Vendor cost through horizon-
Vendor cost minus internal cost-
Internal minus vendor recurring monthly cost-
Transition-cost payback at recurring savings-
Decision view
Internal versus vendor cost
Internal versus vendor costRecurring and transition costs remain visible beside the horizon difference.
Internal and vendor horizon-cost crossoverVendor fixed monthly fee is varied while internal and vendor horizon costs remain on the same scale, making the sourcing threshold visible.
Exact scenario comparisonVendor fixed monthly fee changes while all other entered assumptions remain constant.
| Vendor fixed monthly fee | Internal monthly delivery cost | Vendor recurring monthly cost | Internal cost through horizon | Vendor cost through horizon | Vendor cost minus internal cost | Internal minus vendor recurring monthly cost | Transition-cost payback at recurring savings |
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Period-by-period detail
Internal and vendor horizon ledger
How to use Outsourcing Cost Comparison Calculator
- Enter comparable internal and vendor service volumes.
- Include retained internal governance cost in the appropriate option.
- Set the decision horizon and transition cost.
- Compare recurring savings, horizon totals, and payback before reviewing service risk.
Calculator guide
Understanding Outsourcing Cost Comparison Calculator
An outsourcing comparison separates recurring delivery economics from one-time transition and governance cost. The horizon matters because an attractive monthly saving may take many months to recover implementation expense.
Calculation method
How the calculation works
Compare fully loaded internal delivery with fixed and variable vendor pricing, including transition cost and recurring-savings payback. Internal monthly cost combines required hours and loaded hourly cost with overhead. Vendor monthly cost combines fixed fee and variable service hours. Horizon totals multiply recurring costs by months, with transition cost added to the vendor option.
Vendor decision
Test the operating model behind the price
The financial comparison should be accompanied by a service and exit plan.
Worked situations
Practical examples
- A vendor can save money monthly but remain more expensive during a short transition horizon.
- More vendor hours raise only the variable portion of the vendor charge.
- If vendor recurring cost exceeds internal cost, transition payback is not meaningful.
Better inputs
Useful tips
- Normalize internal and vendor scopes before comparing prices.
- Include change requests, retained staff, and contract management.
- Stress vendor inflation and demand variability.
Before relying on the result
Limitations and common mistakes
- Service levels, quality, security, compliance, and transition failure are not valued.
- Recurring rates remain constant and cash flows are not discounted.
- Termination cost, FX, taxes, inflation, and stranded internal cost are excluded.
Reference
Key terms
- Retained organization
- Internal staff and cost that remain to govern outsourced work.
- Transition cost
- One-time migration, implementation, and governance setup cost.
- Recurring savings
- Internal monthly cost minus vendor monthly cost.
- Payback
- Transition cost divided by positive recurring monthly savings.
Important note
Calculated from the entered values using the displayed accounting method. Reconcile material decisions with source records and applicable accounting policy.
Frequently asked questions
What does a positive vendor-minus-internal difference mean?
The vendor option costs more over the entered horizon.
When is transition payback meaningful?
Only when recurring vendor cost is lower than recurring internal cost.
Should internal overhead be included?
Include only overhead that is relevant to the decision and avoid double counting retained cost.
Does this calculate NPV?
No. It compares undiscounted horizon totals.