Even cost-cutting measures are now too expensive

BusinessWeek reports:

The economic slump has become so pronounced that even outsourcing is getting scaled back. Executives who once relied on outside firms to handle certain IT tasks to cut costs are now reining in some outsourcing plans on concern they're too expensive.

The article is specifically talking about off-shoring.

I disfavor any work arrangement where half the team is located somewhere else, unless a clear division of responsibility can be identified (in which case, you really have two teams). Great camaraderie helps you form a great team. "Negotiations" -- meaning, any agreement that has to be reached between 2 or more parties -- done in person have twice as much success than those done over the phone, and four times greater than email. (They haven't studied twittering yet...)

Outsourcing adds the additional problem of agency, where the development team's incentive is to benefit the outsourcing company, not the client. Yes, the two often overlap, but not always. Similar problems can occur when a big company makes its IT team a silo that reports to no specific business unit. Developers should have frequent interaction with the client, whether internal or external.

Off-shoring adds additional layers of problems involving culture, language, and time difference.

The poster child for off-shore outsourcing is manufacturing, where you can hire assembly line workers at crazy low wages. Yet, recent studies show even that may be false savings.

Can't control quality in manufacturing -- think how much more difficult software is.