I think I can put this in a simple nutshell. Why? Because I have witnessed how stuff gets outsourced first hand as well as the results. (a number of times, not just one isolated instance)

1. Company A makes product X, and makes lots of money making product X.

2. Company A gets approached by Company Z about making some software for them, however all of Company A staff are working on product X2 (next gen of X)

3. Company A's marketing retards have promised Company Z that they can make the software that Company Z wants usually by a scheduled dat cooked up by the marketing retards without consulting any engineers (or if so only in passing and not in great detail)

4. Company A then realizes that they can't take people off X2 to work on the new product, and it is tough to find software engineers and ramp them up that quickly. Not to mention that the board of directors and managers high up (who know nothing of the engineering aspect of the problem) get greedy and see that you can hire people in India or China for 1/60th the cost!

5. Company A contacts an outsourcing firm and asks if they can do the project in the retarded span of time. The outsource companies always say yes, even if they don't understand what you are making. They always say yes. I have NEVER heard of an outsource company saying they can't do it, or even by a rediculous time frame.

6. Company A sends everything to the Chinese or Indians.

7. Code comes back, usually hard coded, usually unreadable with variables like X, Y, so on. Usually untested and so full of bugs it is unbelievable. Usually the code is so f**ked that it has to be rewritten from scratch in a panic or patched to hell in back.

8. Company A can't deliver, or delivers the sh** version to Company Z. Company Z is usually pissed.

This results in stock holders being pissed and managers pushing hard on the people at Company A to rectify the situation as if it was there falt.

Oh, and did I mention. Anytime people outsource, I have NEVER seen them once ask about the education of the people doing the code. So that part doesn't even matter. They could be giving the code to a bunch of chimps to do.

So in a nutshell DON'T outsource to third world countries or even developing countries for that matter. I have NEVER seen a project ever come back working as promised.