ROI of offshore outsourcing in 12 months: the TCO methodology nobody publishes because it kills the marketing arguments

Before calculating an offshore ROI, you need to set the denominator correctly. And most SME owners underestimate the real cost of their French employees. Not out of incompetence, but because nobody ever aggregates all the line items in one place.

Take a developer on a €42,000 gross annual salary. The employer cost doesn't stop at social contributions. Here's what you're actually paying, and what you need to include in your comparison: gross salary, employer social contributions (approximately 45%), mandatory health insurance, disability insurance, occupational health, commuting costs (50% of the Pass Navigo or equivalent), meal vouchers, IT equipment (workstation, screens, licenses), office rent prorated per workstation, electricity and office running costs, mandatory training and CPF, recruitment costs amortized over 12 months (agency, job ads, time spent), paid leave (you pay for 12 months but get 10.5 months of work), and finally average absenteeism (7 days per year in the French private sector, according to DARES). Real total for a €42,000 gross salary: between €62,000 and €72,000 per year depending on your location and collective agreement. That figure is your baseline for comparison. Not the gross salary. If you compare an offshore salary to a French gross salary, your business case is wrong from the very first line. For an SME outsourcing several functions, this error compounds, as shown in notre analyse des 6 fonctions à externaliser en priorité.

A full-time French employee works approximately 1,607 hours per year. Subtract unproductive internal meetings (estimate 4 hours per week for an operational profile), open-plan office interruptions, and context-switching time, and you're down to 1,200 truly productive hours in the best-case scenario. Your developer with a total cost of €65,000 is therefore costing you around €54 per productive hour. Not €27 as a naive calculation based on gross salary divided by 1,607 hours would suggest. This ratio of real productive hours is the same in offshore. The difference is that the base cost is three times lower. When you calculate an ROI, you must compare productive hours to productive hours, not salaries to salaries. A dedicated offshore employee working exclusively for one client, never shared across accounts, is not interrupted by meetings from three other projects. Their real productivity rate is often higher than that of an employee in a Parisian open-plan office.

The average cost of a recruitment in France ranges from €5,000 to €15,000 (job ads, agency, HR time, interviews). That's not the problem. The problem is the failed hire. A departure before 12 months costs you the initial recruitment fee, the salary paid during the unproductive period (the first 2 to 3 months), a new recruitment, and the loss of output during the vacancy. According to the Hays Group, 36% of permanent contracts are terminated within the first year. For an SME with 10 employees, that means one in three hires is a money pit. Factor this risk into your internal benchmark. If your historical turnover rate is 25% per year, add 25% of the recruitment cost to your annual cost per position. This figure radically changes the threshold at which offshore outsourcing becomes profitable. It's no longer about "dividing by 3": it's about comparing a stabilized cost with structured management against a French cost inflated by instability.

The local salary of an employee in Madagascar is not your offshore cost. It's the first line of a spreadsheet that contains eleven. Here is every item, with real-world ranges. If your provider omits three of these lines, your business case is skewed before you've even signed.

First block: local gross salary. A mid-level developer in Antananarivo costs between €600 and €1,200 per month gross. An administrative assistant, between €400 and €700. An experienced French-speaking SDR, between €500 and €900. Add to this local social contributions (approximately 20% of gross in Madagascar), contributions to CNaPS and OSTIE, and common benefits in kind (transport, meals). Second item: your offshore partner's management fee. This is the cost of the structure that recruits, equips, manages and oversees your employee. At a well-structured provider, this fee covers European-side management, technical infrastructure, office space, HR support, and quality supervision. It generally represents between 50% and 100% of the local gross salary. This fee is what makes the difference between an employee left to fend for themselves and one who is genuinely integrated into your team. To understand how this integration works in practice across various functions, see le comparatif entre outsourcing multifonction et prestataire spécialisé.

This is the item that 90% of offshore business cases ignore, and it's the one that makes the difference between a positive ROI at month 4 and a positive ROI at month 8. Transition costs include: time spent writing procedures and documentation (budget 20 to 40 hours of your time on the French side), initial training for the offshore employee (between 2 and 4 weeks depending on the complexity of the role), the underperformance period during the ramp-up (the employee produces approximately 50% of their target capacity in month 1, 75% in month 2, and 100% from month 3 onwards), the time your manager or internal point of contact dedicates to oversight (estimate 5 hours per week in month 1, 3 hours in month 2, and 1 hour thereafter), and any process or tool adjustments required. In total, transition costs represent between 1 and 2 additional months of offshore salary. Amortize this over 12 months in your calculation. A provider who promises an immediate ROI from month 1 is either lying or has never actually deployed an employee for real. To accelerate this phase, le protocole de transfert de compétences en 2 semaines is a proven framework.

You have the right cost lines. What remains is assembling them correctly. Here are the errors we see in 80% of the business cases that business owners submit to us before signing. Each one can shift your ROI projection by 3 to 6 months.

This is error number one. And it's the one offshore providers exploit most in their communications. "A developer at €800 per month versus €3,500 gross in France: divide by 4!" Except that the French employer cost for that developer is €5,500, not €3,500. And the real offshore cost, including management fee, infrastructure and tools, is €1,800, not €800. The real ratio drops from "divided by 4" to "divided by 3". That's still excellent, but the gap between the promise and reality creates mistrust — and rightly so. Second variant of this error: not including benefits in kind on the French side. Health insurance, disability coverage, meal vouchers, transport: these items represent €3,000 to €5,000 per year per employee. Leave them out and your offshore ROI appears worse than it actually is. Third variant: ignoring paid leave. You pay for 12 months but get 10.5 months of work in France. In Madagascar, local labor law also provides for paid leave, but the ratio of days actually worked is higher. Factor in the real number of working days on both sides.

Your business case must not only answer "how much will I save". It must answer "how much does every month without this role filled cost me". If you have no SDR, how many prospects are never followed up? If you have no administrative assistant, how many hours do you spend each week on data entry instead of selling? Put a number on this shortfall. An SME owner who charges €150 per hour and spends 10 hours per week on administrative tasks is losing €78,000 in value per year. A dedicated offshore assistant costs them €15,000 all-in. The ROI is not 3x — it's 5x, because the cost of inaction exceeds the cost of the unfilled role. Include this line in your calculation. Not as an emotional argument, but as a figure: the revenue you are not generating because you are busy doing low-value-added work. It is often the most important line in the spreadsheet — the one that transforms "interesting" into "urgent". Every month of hesitation is a month of lost revenue.

An offshore employee, like any new hire, does not perform at 100% from day one. If you project your ROI over 3 months, you're capturing the transition phase (high costs, low productivity) without benefiting from the cruising phase (stabilized costs, peak productivity). Result: your business case looks negative, and you don't sign. That's a mistake. The realistic productivity curve over 12 months looks like this: in month 1, the employee operates at 50% of their target capacity. In months 2 and 3, they rise to 75%. From months 4 to 12, they are at 100% or beyond, because they now know your processes better than a newly hired French employee would. The real ROI must be calculated over a minimum of 12 months, factoring in the progressive ramp-up. On this basis, the break-even point — the month at which cumulative savings exceed total investment including transition costs — typically falls between month 3 and month 5. Not month 1. Another common error: not modeling the failure scenario. What happens if the employee doesn't work out after 2 months? What is the replacement cost? A partner that hires locally on permanent contracts and maintains a talent pool can replace a profile in 2 to 3 weeks. A freelancer who disappears sends you back to square one.