Outsourcing Cost Estimate
This is a practical guide to building a cost estimate for an outsourcing project — a forecast of the money required to complete the work, adapted to the realities of outsourcing a function to an external provider.
What a Cost Estimate is
A cost estimate is a forecast of the money required to complete the work. For the full concept and how it works in general, see Cost Estimation. On an outsourcing project it plays the same role, tuned to this kind of work.
Why it matters for an Outsourcing project
Outsourcing projects live or die on outsourcing a function to an external provider. A well-built cost estimate gives the team a shared, explicit reference for exactly that — reducing ambiguity, aligning stakeholders, and making problems visible early enough to act. Skipping it, or doing it generically, is how outsourcing projects drift into avoidable delay and cost.
What to include
- Labour costs
- Material/equipment costs
- Indirect costs
- Contingency
- Estimate basis and assumptions
Outsourcing-specific considerations
Tailor the cost estimate to the risks that most often derail outsourcing projects:
- Knowledge transfer
- Service-level definition
- People impact
Example
On a real outsourcing project, the cost estimate would be shaped by outsourcing a function to an external provider. In particular, it should explicitly account for the project’s biggest risks — knowledge transfer, service-level definition, people impact — rather than treating them as afterthoughts.