What offshore development actually saves.

Start with the true cost of a local hire

Comparing an offshore hourly rate against a local salary understates the gap, because salary is not what a local engineer costs.

A senior engineer on $150,000 in the US typically costs the business closer to $200,000 once payroll taxes, benefits, equipment, software licences and allocated overhead are included. Recruiting adds a one-off cost of 15-25% of first-year salary, and the role sits open for a median of two to three months before it is filled.

That fully loaded figure is the correct comparison. Against it, a $3,500 per month dedicated engineer represents roughly $42,000 per year, which is where the 60-70% headline originates.

Now subtract the costs that do not disappear

Several costs stay with you regardless of where the engineer sits, and they reduce the realised saving.

Management overhead increases rather than decreases: distributed work needs more written communication, more explicit specification and more review. Budget a meaningful share of a senior person's week for this, particularly in the first quarter.

Ramp-up is real. An engineer joining an existing codebase produces limited output for the first two to four weeks regardless of seniority. If your engagement is only three months, that period is a substantial proportion of the total.

Timezone friction has a cost even with good overlap. A question that would take thirty seconds in person can take a day when it is asked outside the overlap window, and that latency compounds across a sprint.

A worked example

Consider two senior engineers for twelve months.

Local: two engineers at roughly $200,000 fully loaded each, plus recruitment at around $60,000 combined, gives approximately $460,000. Offshore: two dedicated engineers at $3,500 per month gives $84,000, plus perhaps 15% of a senior manager's time for coordination at around $30,000, giving roughly $114,000.

That is a saving near 75% on paper. Apply a realistic productivity discount for ramp-up and communication friction in the first quarter, and the effective saving over the year lands closer to 60-65%. Still substantial, but meaningfully below the headline.

When offshore does not save money

• Engagements shorter than three months, where ramp-up dominates the timeline
• Work requiring constant real-time collaboration with several stakeholders
• Poorly specified work where requirements emerge through conversation
• Products needing deep existing domain knowledge that is not written down anywhere
• Teams with no capacity to manage or review the incoming work

The variable that matters most

Across engagements, the strongest predictor of realised saving is not the rate. It is whether someone on the client side owns the relationship actively.

Where a named person handles unblocking, reviews pull requests promptly and treats the offshore engineer as part of the team, savings land close to the theoretical figure. Where the engineer is left to interpret tickets alone and waits two days for review, output falls and the arrangement is judged a failure that was actually a management failure.

This is the honest version of the pitch: offshore development transfers cost from salary to coordination. If you are prepared to invest in the coordination, the saving is real and large. If you are not, the rate will not rescue you.