Many C level managers have an almost magical faith in the ability to take projects offshore. The amusing thing is how many of the same managers distrust telecommuting. The issues for the two are very similar, although offshoring typically adds greater distance and cultural issues into the mix. I ran across an interesting case study in the Wall Street Journal on this - the summary is copied below:

ValiCert expected to save millions annually while cranking out new software for banks, insurers and government agencies. Senior Vice President David Jevans recalls optimistic predictions that the company would "cut the budget by half here and hire twice as many people there." Colleagues would swap work across the globe every 12 hours, helping ValiCert "put more people on it and get it done sooner," he says.

The reality was different. The Indian engineers, who knew little about ValiCert's software or how it was used, omitted features Americans considered intuitive. U.S. programmers, accustomed to quick chats over cubicle walls, spent months writing detailed instructions for overseas assignments, delaying new products. Fear and distrust thrived as ValiCert's finances deteriorated, and co-workers, 14 times zones apart, traded curt e-mails. In the fall of 2002, executives brought back to the U.S. a key project that had been assigned to India, irritating some Indian employees.

"At times, we were thinking, 'What have we done here?' " recalls John Vigouroux, who joined ValiCert in July 2002 and became chief executive three months later.

Shifting work to India eventually did help cut ValiCert's engineering costs by two-thirds, keeping the company and its major products alive -- and saving 65 positions which remained in the U.S. But not before ValiCert experienced a harrowing period of instability and doubt, and only after its executives significantly refined the company's global division of labor.

That last paragraph is the instructive part - eventually, they saved money. It required a lot of learning about what worked, what didn't, and a lot of uncertainty (and near disaster) in between. What does that mean? It means that offshoring work is not to be taken lightly - you have to look at as a project that is on a scale with installing a corporate wide ERP system. It's going to require changes in internal culture and processes. Consider how many ERP projects founder on those shoals, and you'll start to see why so many offshoring projects run into problems - changing culture and processes immediately gets into internal politics. Many people will fight against the changes based solely on inertia. In fact, if you know that large scale change like this is unlikely to work at your firm, then offshoring is likely going to be a very, very dicey proposition. If you have trouble with internal communications, sending work 12 hours away is only going to make things worse.

Bottom line - it's not that offshoring can't work (clearly, there are firms that make it work, just as there are firms that make telecommuting work). It's a big change though, and something that should get looked at seriously, rather than the almost offhanded "lets save a bunch of money" kind of thinking that seems to be all too common