PSG Grant Explained: When Offshore from India Beats a PSG-Approved Vendor

Singapore's Productivity Solutions Grant (PSG) is generous — up to 50% co-funding for pre-approved digital and tech solutions. Every Singapore SME considers it. But here's what most founders don't realize: PSG often makes offshore from India more attractive, not less.

This post breaks down the honest math: when PSG wins, when offshore wins even after PSG, and how to think about the choice without falling for the "grant = free money" mental trap.

What PSG actually covers

PSG funds SMEs adopting pre-approved IT solutions. Relevant tracks:

• PSG IT Solutions: Up to 50% co-funding for pre-approved software (CRM, accounting, HR, e-commerce).
• PSG Equipment: Tools and hardware.
• PSG Job Redesign: Specific consulting frameworks.

Critical detail: PSG funds pre-approved solutions from pre-approved vendors. Custom development, bespoke design, novel features — not eligible.

The math nobody runs

Same project priced two ways: SaaS web platform with custom features, dashboards, third-party integrations.

Path A: PSG-approved Singapore vendor

• Quoted: S$120,000
• PSG covers 50% (within caps): S$60,000
• Out of pocket: S$60,000
• Catch: Limited to PSG-approved features. Customization isn't covered.

Path B: Offshore Indian agency

• Quoted: S$25,000
• PSG: Not applicable
• Out of pocket: S$25,000
• Bonus: Full customization included.

Offshore is S$35,000 cheaper even after PSG fully subsidizes the SG vendor.

When PSG actually wins

• Your project fits a pre-approved template exactly
• You're an SME (not venture-backed)
• Pre-approved vendor pricing is already reasonable (e.g., S$15K quote → S$7.5K after subsidy)
• You want SG-based support and onboarding included

When offshore wins (even after PSG)

• Custom development required
• Multi-discipline project needed
• Speed matters (PSG approval takes 4–6 weeks; offshore starts in 48 hours)
• You're not PSG-eligible (foreign-incorporated, venture-backed above SME threshold)

The PSG paradox

Counterintuitive truth: PSG can make local agencies more expensive, not cheaper. PSG-approved vendors know clients are using grant money. Their pricing reflects this. A SG agency quoting S$120K for a project that should cost S$50K is partly arbitraging the grant. The 50% subsidy still puts your out-of-pocket at S$60K — more than the project's actual market value.

Real Singapore founder examples

Example 1: Foreign-incorporated fintech (Series A). Not PSG-eligible. Quotes: S$220K CBD agency vs S$32K offshore. Decision: offshore. Saved S$188K.

Example 2: SG-incorporated SME (e-commerce). PSG-eligible, needs Shopify store. Quotes: S$18K PSG-approved Shopify partner (PSG covers S$9K) vs S$12K offshore. Decision: PSG vendor. Net cost lower plus included training.

Example 3: SG-incorporated SaaS startup (Series A). Exceeds SME revenue threshold, not PSG-eligible. Quotes: S$180K Marina Bay agency vs S$28K offshore. Decision: offshore. Saved S$152K.

The hybrid strategy

Smartest SG founders don't pick one. They hybrid:

• PSG for templated tools: Xero accounting, HubSpot CRM, Shopify e-commerce — 50% subsidized.
• Offshore for custom work: Custom SaaS, mobile apps, AI integrations, design systems.

The decision framework

• Are you PSG-eligible (SG-incorporated SME)? No → offshore. Yes → next.
• Does your project fit a pre-approved template exactly? No → offshore. Yes → next.
• Is unsubsidized SG quote less than 2x offshore quote? Yes → PSG wins. No → offshore still wins.

The bottom line

PSG is great for the right project. But it's not "free money" — it's a 50% subsidy on prices that often reflect the subsidy's existence. For custom development, multi-discipline projects, or non-PSG-eligible companies, offshore from India is structurally cheaper even when PSG would notionally apply.