Most outsourcing is done to "save money." Basically it is "assumed" that if a company wants to cut IT dollars, it should strip down its internal unit and send all its heavy stuff (apart from PC maintenance) to Bangalore, or Poland, or Buenos Aires. According to an article by Cio jury, this is true in some cases, but is not necessarily true ALL the time. 

Those promised money savings may never materialize and may even add to the bottom line. And if it does reduce cost, it may negatively affect the quality of service a company offers. Let's give an example where a company's enterprise software programming is shipped to some IT capital. Nobody is exactly sure about quality control or quality assurance. Testing takes time and when faced with a deadline, some programmer is going to build and test the whole thing in assembly line fashion. Granted, this is a broad generalization, but I have seen it happen. It gets back to the customer and the back end is working, but... what's with the GUI? Some buttons don't work and the software doesn't do anything without giving you an error message. 

You plunked down a fifth of the amount you would spend on a programmer in the United States, but now you have a program that needs fixing. And there is no money back guarantee if you are unhappy. To use common parlance, "you are stuck with it." You use the rest of your IT budget to bring in some local IT firm or rehire a programmer on a contract basis, pay some more money to have the program fixed (another man's code, only God knows if the code is well commented), and you may even have to start from scratch -- thus giving you one package for twice the money.

Lest you think I am exaggerating, look around at people who have sworn off outsourcing. Most of them were burned by bum jobs and found out that they had no legal recourse. Countries have different laws and if you don't understand or have a relationship with the company to which you are outsourcing, it becomes a bit of a problem when it comes to support and trouble shooting. Several of these companies are great to work with, but you cannot be sure unless you have referrals and a knowledge of their work ethos (their work ethic is already spoken for). The problem is that when you are shopping for price savings, quality always suffers (Wal-mart sneakers anyone?).

One organization that has cut costs through outsourcing is Vocalink. Nick Masterson-Jones, IT director at Vocalink, said "We have focused on outsourcing work packages to trusted partners and we have achieved significant cost-savings by doing so. By retaining accountability in-house and by keeping the scope of the packages tightly controlled, we have managed to avoid some of the pitfalls that make the front pages of the computer press."