Total cost of ownership
In software outsourcing, total cost of ownership is the real cost of an engagement beyond the hourly rate: onboarding and ramp, management overhead, rework from miscommunication, and churn. The hourly rate is usually only 65 to 75 percent of it, so a useful rule is to add 25 to 35 percent to a quoted blended rate.
The hourly rate is the number everyone compares and the one that tells you least about what you will actually spend. The rest of the cost is real and lands whether or not anyone names it up front: a new engineer ramps for two to four weeks, someone has to assign and review the work, miscommunication produces rework, and if a person leaves at month four you pay the ramp cost twice.
This is why the cheapest rate rarely wins. A spreadsheet cannot see lost days. The genuinely cost-effective choice is the lowest total cost, which tends to be senior talent in a market that has not been bid up to Western European levels, working your hours.
